Ahead of the Spring 2016 budget, there has been a huge increase in the number of enquiries regarding the use of Beneficial Interest Company Trusts to avoid the need to rearrange mortgage finance when incorporating residential rental property businesses.
The rules regarding Stamp Duty Land Tax changes are still not clear but one thing is for sure, SDLT isn’t going to be any cheaper for anybody and may well increase significantly for most if not all BTL related transactions. However, the increase in enquiries may well be due to speculation that The Chancellor could announce the withdrawal of section 162 incorporation relief for private landlords.
This is the tax relief which can cancel out CGT on transfers to a company. Thankfully it wasn’t mentioned in the 2015 Autumn statement but speculation is rife that George Osborne (seemingly intent upon taxing private landlords out of existence) will introduce the measure at some point in order to trap private landlords into paying the additional taxes announced in his Summer Budget 2015, i.e. clause 24, restricting finance cost relief for individual landlords.
The cost of re-arranging finance is a major hurdle for landlords to consider when moving assets into a company. However, taxation is associated with beneficial ownership (who gets the profits) whereas mortgage lenders are focused on legal ownership of asserts pledged as security and their ability to repossess them in the event of default.
Beneficial Interest Company Trusts enables landlords to incorporate without having to change their financing arrangements. Last year, a QC at the highly acclaimed Pump Court Tax Chambers provided opinion that a transfer of 100% of beneficial interests in a property portfolio to a company would qualify for section 162 incorporation relief, subject to all other conditions associated with case law being met. The effect is that private landlords can benefit from the tax structure of companies which remains untouched and allows mortgage interest to continue to be offset against rental profits.
Friday 29 January 2016
Thursday 21 January 2016
Right to Rent checks mandatory in England from 1 February 2016
Right to Rent checks will become mandatory for all adult occupiers with new tenancies in England from 1 February 2016
The new Code includes amended lists of acceptable documents for Right to Rent checks. The Home Office planned a more complicated structure for the ID lists with certain documents weighted for importance. However, our lobbying efforts have resulted in this structure being rejected in favour of the simpler existing system. Amended lists of acceptable documents are specified in section 5.2 of the updated Code.
Immigration Minister James Brokenshire:
“Landlords with property in England need to prepare now for the new Right to Rent scheme to ensure they are ready for 1 February.
“Right to Rent is part of the Government’s wider reforms to the immigration system to make it stronger, fairer and more effective. Those with a legitimate right to be here will be able to prove this easily and will not be adversely affected. The scheme is about deterring those without the right to live, work or study in the UK from staying here indefinitely.”
Here’s a reminder of how to carry out checks
- Establish who will be living in the property
- Carry out the checks on all adult occupiers
- Retain the documentation until 12 months from the end of the tenancy
- Be ready to produce evidence of the checks if required
The Home Office are running a media campaign to highlight awareness among landlords and tenants. We have stressed the importance of this; the more that consumers are aware of an expectation to meet the new requirements, the easier it will be for agents to comply.
It remains to be seen how a multi-agency approach to enforcement works as the scheme is rolled out across England however you could face a civil penalty of up to £3,000 per tenant for renting your property to someone who isn’t allowed to stay in the UK.
YOUR AGENT Comment:
These new regulations apply to England Only. We will keep all our clients updated about any changes that effect them.
Wednesday 6 January 2016
UK landlords report increased tenant demand in third quarter of 2015
Private
rented sector tenant demand continued to grow across the country in the
third quarter of 2015 with 41% of landlords reporting a rise in demand.
The data from a survey by Paragon Mortgages also shows that rental yields, that is annual rental income as a percentage of property value, have remained at the same levels seen throughout 2015.
The survey, undertaken by BDRC Continental on behalf of Paragon Mortgages, found that yields averaged 5.6% nationally in the third quarter and amongst Paragon customers this figure was higher, with a national average of 5.9%.
The greatest number of landlords, 17%, reported yields between 3% to 4%, while one in 10 landlords reported yields of 10% or more.
Yorkshire and the Humber reported the highest yields in the third quarter at 6.1% with outer London reporting the lowest at 4.8%, despite outer London having the second largest increase in levels of tenant demand.
On tenant demand, the East of England region has performed best in the quarter with 52% of landlords reporting an increase in demand. This figure was just 31% for the North East with a national average of 41% of landlords saying demand had increased.
This figure represents a strong year on year increase in tenant demand across several regions since the third quarter of 2014 with the demand in the North East having increased from 23% to 31% and in outer London from 42% to 48%.
'This research shows that yields, and tenant demand have remained strong throughout the third quarter, in common with 2015 overall. The figures reflect a steadily improving economic outlook for the UK as a whole and show that, more and more people are actively choosing the flexibility of making a home in the private rented sector,’ said John Heron, Director of Mortgages at Paragon.
‘Yields too have remained stable throughout 2015. Quarter three data shows London and the South East slowing down somewhat, while yields in the regions are growing. This represents a welcome rebalancing of the national economy, with some of the heat from London’s economy escaping the M25 and being distributed around the country,’ he added.
YOUR AGENT comment
We continue to see strong tenant demand and are currently running at a 98% occupancey. rate. We despirately need new properties for waiting tenants. So if you are a landlord who is looking for a first class srevice then Why not let YOUR AGENT be your agent.
The data from a survey by Paragon Mortgages also shows that rental yields, that is annual rental income as a percentage of property value, have remained at the same levels seen throughout 2015.
The survey, undertaken by BDRC Continental on behalf of Paragon Mortgages, found that yields averaged 5.6% nationally in the third quarter and amongst Paragon customers this figure was higher, with a national average of 5.9%.
The greatest number of landlords, 17%, reported yields between 3% to 4%, while one in 10 landlords reported yields of 10% or more.
Yorkshire and the Humber reported the highest yields in the third quarter at 6.1% with outer London reporting the lowest at 4.8%, despite outer London having the second largest increase in levels of tenant demand.
On tenant demand, the East of England region has performed best in the quarter with 52% of landlords reporting an increase in demand. This figure was just 31% for the North East with a national average of 41% of landlords saying demand had increased.
This figure represents a strong year on year increase in tenant demand across several regions since the third quarter of 2014 with the demand in the North East having increased from 23% to 31% and in outer London from 42% to 48%.
'This research shows that yields, and tenant demand have remained strong throughout the third quarter, in common with 2015 overall. The figures reflect a steadily improving economic outlook for the UK as a whole and show that, more and more people are actively choosing the flexibility of making a home in the private rented sector,’ said John Heron, Director of Mortgages at Paragon.
‘Yields too have remained stable throughout 2015. Quarter three data shows London and the South East slowing down somewhat, while yields in the regions are growing. This represents a welcome rebalancing of the national economy, with some of the heat from London’s economy escaping the M25 and being distributed around the country,’ he added.
YOUR AGENT comment
We continue to see strong tenant demand and are currently running at a 98% occupancey. rate. We despirately need new properties for waiting tenants. So if you are a landlord who is looking for a first class srevice then Why not let YOUR AGENT be your agent.
95% loans hit post-recession high
What’s the latest?
The number of mortgages for buyers with just a 5% deposit has surged to its highest level since the recession struck.
There were 260 loans available for buyers wanting to borrow 95% of their home’s value in November – that’s an enormous 84% jump on a year ago.
And at the same time, the average rate charged on one of the loans fell to 4.12%, the lowest since the credit crisis, narrowing the gap with mortgages that require a 25% deposit.
Why is this happening?
Mortgage lenders are gradually recovering their appetite for risk following the credit crisis. And the surge in mortgages at high loan-to-value (LTV) ratios – that is how much mortgage is owed compared with how much the home is worth – is being driven by the government's Help to Buy scheme.
There are now six times as many mortgages for buyers with just a 5% deposit as there were in September 2013, before the mortgage guarantee element of Help to Buy was launched, when only 43 of the loans were available.
The number of deals has increased by 68 in the last three months alone, at a time when competition in other areas of the mortgage market has remained stable or even declined.
The number of mortgages for buyers with just a 5% deposit has surged to its highest level since the recession struck.
There were 260 loans available for buyers wanting to borrow 95% of their home’s value in November – that’s an enormous 84% jump on a year ago.
And at the same time, the average rate charged on one of the loans fell to 4.12%, the lowest since the credit crisis, narrowing the gap with mortgages that require a 25% deposit.
Why is this happening?
Mortgage lenders are gradually recovering their appetite for risk following the credit crisis. And the surge in mortgages at high loan-to-value (LTV) ratios – that is how much mortgage is owed compared with how much the home is worth – is being driven by the government's Help to Buy scheme.
There are now six times as many mortgages for buyers with just a 5% deposit as there were in September 2013, before the mortgage guarantee element of Help to Buy was launched, when only 43 of the loans were available.
The number of deals has increased by 68 in the last three months alone, at a time when competition in other areas of the mortgage market has remained stable or even declined.
Who does it affect?
The increased availability of 95% mortgages is great news for first-time buyers and would-be borrowers with small deposits.
With the average home hovering around the £200,000 mark, many buyers would struggle to raise the £40,000 needed to put down as a deposit on an 80% LTV mortgage.
Not only do buyers now have more choice, but the average interest rate charged on a 95% LTV loan has fallen from 5.27% in November last year to 4.12%, making it more affordable.
By comparison, the rate on average 75% LTV mortgages fell from 2.17% to 1.9% over the same time spell.
The increased availability of 95% mortgages is great news for first-time buyers and would-be borrowers with small deposits.
With the average home hovering around the £200,000 mark, many buyers would struggle to raise the £40,000 needed to put down as a deposit on an 80% LTV mortgage.
Not only do buyers now have more choice, but the average interest rate charged on a 95% LTV loan has fallen from 5.27% in November last year to 4.12%, making it more affordable.
By comparison, the rate on average 75% LTV mortgages fell from 2.17% to 1.9% over the same time spell.
Unsurprisingly, the increased availability of mortgages requiring a 5% deposit has led to a jump in first-time buyer numbers, with 86,800 people getting onto the property ladder between July and September.
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