The change landlords definitely don’t want to see announced in the Autumn Statement

As Wednesday’s statement looms large, landlords across the country that were negatively impacted by the capping of tax relief on mortgage interest payments in the Summer Budget could again be targeted by the Chancellor.

Following the capping of relief on mortgage interest, leading tax planning and investment specialist, OneE Group is warning landlords that the government might turn its gaze towards capping or scrapping s162 tax relief used to mitigate Capital Gains Tax (CGT) upon incorporation.

Dominic Slattery, managing director, OneE Group said that the taxman could make such a move to close the door to landlords that are incorporating their portfolio to sidestep the new buy-to-let mortgage relief rules.

“The Summer Budget saw HMRC make an unprecedented change to the tax system that took landlords into a whole new punitive regime of their own with certain businesses and self-employed individuals unable to relieve bank interest costs against rental income. Realising they will be severely affected, highly leveraged landlords and those with little equity because they have structured their portfolio towards investing capital growth into further properties, have understandably acted to protect their assets and retain their income by incorporating.

“Incorporation relief means that landlords transfer their business to a company in return for shares, the value of which can be offset against the capital gain. As such, if portfolio equity levels are the same or greater than the capital gain, there would be no CGT payable at all.

“As a reaction to this however, there is talk that HMRC might act to mitigate any tax advantage that would arise from incorporation by removing or capping s162 tax relief and charging CGT upon incorporation. If it happens, this would be a reactive decision to undo a longstanding and successful piece of legislation, driven only by an urge to maximise revenue and pressure leveraged landlords to sell.”

Based in Bolton, One E Group is one of the largest independent tax advisory firms in the UK. Founded in 2006, the company and its directors are recognised by industry leading professional bodies including the Chartered Institute of Taxation.

Dominic concludes: “I would advise landlords that are highly leveraged, or were perhaps considering incorporation to pay close attention to the statement. If changes are made or you feel you need further advice, a second opinion could help you to confirm your position and decide on the best course of action.”

For further information about OneE Group and the services it offers, please visit www.oneegroup.com or call 01204 559 914.  

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dave.beresford@marketecture.co.uk

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