RLA News Service

The RLA regularly campaigns for fair treatment of landlords under the tax system. Currently, landlords in the private rented sector are not treated as traders so they do not obtain all of the reliefs normally open to those in business. The RLA continues to lobby for improved tax treatment for landlords. We are arguing for reduced VAT rates for conversions and repairs.

1. The Association would be very concerned at any proposal to withdraw or curtail tax relief on interest borrowings by residential property investors. The Association believes that taking away tax relief would adversely affect the property market as a whole. Not only residential landlords, but owner occupiers will suffer in consequence. Any loss of tax relief on interest would be a massive blow to investors’ confidence. There is a strong case to retain tax relief on interest on borrowings.

2. For many years, the Association has urged the Government to alter the law so that residential property investors who are actively involved in managing their businesses are treated as traders. They should be treated in the same way as those who let furnished holiday lettings who already have the same tax treatment as traders. This would then enable those carrying on actively managed residential property investment businesses to claim Capital Gains Tax rollover relief for reinvestment, as well as more advantageous taper relief. On first sight, it might be suggested that this would lead to a loss of tax revenue. On the contrary, it would free up the residential property investment market. Properties would change hands more often. At the moment, many landlords sit on properties because of potential Capital Gains Tax liabilities. This damages both the housing market and tax receipts. There is concern in Government that the private rented sector stock is not as well maintained as other sectors. This would be helped because when a property changes hand there is every likelihood that the new owner will refurbish and improve the property. New owners have new ideas and will make investment in the property. Similarly when properties change hands the Government receives stamp duty land tax and other taxes. All in all, freeing up these properties will both improve the state of the private rented housing stock and increase tax receipts.

3. At present, there is a significant disincentive to converting properties, as opposed to new build. The Government is concerned at the lack of take up of build to let. The same could be said of “convert to let”. Many buildings lend themselves to sub-division extension etc and provide a viable alternative to new build. However VAT treatment in such circumstances is frequently disadvantageous as compared to new build for sale where zero rating is available. There needs to be a review of the VAT treatment of conversions and refurbishments. Reduced VAT rates should apply where a property is converted or refurbished for residential purposes, whether it is sold off or rented out. In this way, bringing new properties into the rented market would be encouraged and this would increase the supply of available housing.

4. There needs to be a system of capital allowances for improving refurbishing, converting or extending residential accommodation to rent so that tax relief is available against income tax.

5. Portfolio sales should not be aggregated so that tax is paid on the value of individual properties instead.