Possible Tax Evasion By Landlords

One of the leading buy to let mortgage companies said that to avoid the Chancellor George Osborne’s hefty, severe tax raid on rental properties, landlords are expected to exploit a loophole in the law.

Simon Bayley, commercial director at Foundation Home Loans, said that he expects to see more than 75 % of mortgaged buy to let purchases going through a limited liability company structure within the next 12 months.

Buy to let investors will set up companies to acquire homes, in order to escape the tax relief for private landlords, and the recently introduced hike stamp duty for those buying second homes and rental properties.

He also believes that landlords will also consider transferring their actual properties onto companies.

He said: “If the plan is to own the property for a long time and the focus is asset growth then it would generally be worth transferring into a limited liability company structure, which can be looked at with a simple calculation to give a good indication as to what would work best for a landlord’s specific circumstances.”

He also points out that if landlords are using revenue from today’s rental, they may require help calculating if the capital expense is within their means, even if the long term benefits suggest a limited liability company structure.

Mike Richards, director of London-based broker Mortgage Concepts Associates, agrees with Bayley’s 75% projection. Being part of a growing number of brokers, he recommends that all new buy-to-let properties are made under corporate structures, which continue to benefit from relief on mortgage interest payments.

His comments were: “I think that gradually most lenders, who are in the sector, will offer this and the premium lenders charged for limited company mortgages of around 0.5% will disappear.” His opinions are also that somehow, an amount of people will still mistrust the limited company route. However, this is the only way really to go for the future of the buy to let market.

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