Ritchie wants a business to not be taxed as a business

An odd idea of tax justice really:

Tax justice could solve this. It would firstly tax the gains on rented property as income and not capital gains. Secondly it would deny tax relief on loans for rented property, just as it is denied to owner occupiers

Buying a house to let it out is a business: just as much as buying a car to rent it out is a business. Thus it should be taxed as a business: the interest is a cost of doing business. On the CGT and income: but not everyone does make money on the capital value of a buy to let. Ss what options are there to deal with losses if it\’s all income tax?

But more importantly I\’m afraid that I can\’t behind the idea that tax justice involves the arbitrary reallocation of one or other type of business across the types of tax codes according to the whims of a retired accountat from Wandsworth. It sorta fails that \”justice\” part.

14 comments on “Ritchie wants a business to not be taxed as a business

  1. Ritchie doesn’t set out any societal problem with buy-to-let. He doesn’t need to; it’s self-evident isn’t it.
    That is, it’s self evident if your idea of justice is to decide you don’t like certain people or groups, decide that’s because they’re to blame for EVERYTHING and then it follows that anything you do to hurt them is justified in social and economic terms. No need for evidence, or for the Law to be blind, or indeed for any principle of natural justice to apply.
    The only thing is, replace ‘rentiers’ with ‘jews’ and can anyone tell me what the difference is between this blogging ex-accountant from Norfolk and Joseph Goebbels?

  2. Blaming people who own property for all the ills of the world is actually a fairly common affliction on this site too.

    Ritchie is just being a bit more specific than Ian B or DBC Reed usually are. And, of course, suggesting existing taxes be employed (as they’ll employ his paymasters) rather than worshipping the idol (idle?) of LVT.

  3. LVT is an existing tax. It’s just rolled up with a tax on your bricks & mortar and called Council Tax.

  4. I suspect that to Murphy a business is a manufacturing firm with lots of employees. A rental landlord therefore isn’t really in business: a house truly belongs to the person who lives in it, so a landlord is just someone who charges a person money for living in their own home. Put that way, it sounds more reasonable to penalise them.

    Of course if you make it more expensive to borrow to let, then rents will have to increase if landlords are to make any money. I think Murphy wants this to mean that landlords would sell out of their now-uneconomic properties, so house supply would increase and prices fall; as he wants it to happen, he’s inclined to believe it will do. Rather more likely in my opinion is that rents would go up to cover the additional costs of those who’ve borrowed to buy-to-let; as those who don’t have to borrow to buy will see increased earnings, house prices will then go up – thus exacerbating one of the problems Murphy wants to solve.

  5. Pellinor

    Please don’t credit him with any economic analysis. He doesn’t want people to buy-to-let – these people must be punished by the tax system. He doesn’t, however, want people to own their own homes either.no, only the State should own homes; we’ll all rent from the State.

    As I say, there is no analysis behind Ritchie except his hatred of those he calls ‘rentiers’. In fact most buy-to-letters are just ordinary people trying to set up a pension plan of sorts. They are as closely related to property barons as 1930s Jewish shopkeepers were to International Finance. What Goebells did with bricks during Kristallnacht, Murphy seeks to do with a tax return.

  6. “Most buy-to-letters are just ordinary people trying to set up a pension plan of sorts”

    And why are they driven to become landlords in order to finance their old age (being a landlord is no easy matter)? Mainly because the State allows (or in fact engineers) the situation whereby £1 earned and saved in your productive life will be worth the square root of bugger all by the time you want to spend it in retirement.

    If cash in the bank held its purchasing value no-one would go within a mile of buy to let as a pension plan.

  7. Ironman/Pellinor

    check out the last comment on this entry – Tim apologies but it really gets to the heart of his real mindset:

    http://www.taxresearch.org.uk/Blog/2013/08/09/how-to-make-sure-almost-every-buy-to-let-landlord-is-taxed-in-two-easy-steps/

    This is his response, with the initial comment;

    ‘“they’re happy with PAYE”
    “They’re happy with their interest being reported”

    Have you any proof of that at all?…..any polling?
    Or is it just, well they put up with it now so they must like it.’

    His reply:

    ‘Do you know what?

    I don’t really care to some extent

    People clearly want what tax pays for

    So it has to be funded – and I think people outside neoliberal think tanks know that’

    Basically – p#$% off you ‘neoLiberals’ – I know what the people want. You really couldn’t script him……

  8. Van_Patten

    I would stop bothering; I did. Ivan Horrocks and Thermustbeanotherway will always be there to listen to him. And he gives Tim free posts all year round. So he’ll be alright.

  9. There is a case to be made that if you’re just living your own life the taxman (actually, can I be obsequiously gender-conscious with negatively-connotated nouns and change that to “taxwoman”?) rooks you for everything s/he can get, no tax relief on your mortgage, which is one of your expenses of doing life.

    Yet if you are out to make money you not only get tax relief on your mortgage on your rental properties you can tailor things to ensure that your taxable deductions (minus actual expenses in maintaining said deductions) ensure you keep the biggest possible portion for yourself.

    Of course, rental properties are treated differently for CGT when you sell them than when you sell the house you live in, but how often does that translate into a “benefit” for owner-occupiers? Once or twice a lifetime.

  10. Mortgage interest is tax deductable. Mortgage capital is not. Renting out properties can be profitable however dealing with problems such as someone saying ‘I’m not paying you more in rent than housing benefit are paying me now’ can wipe out a year’s profit from multiple properties. Seen it happen this year – eviction proceedings not cheap, not quick and until you get non paying renter out and do whatever repairs you can’t rent out again – which can be a few weeks to a few months or even longer!

  11. @ Martin Davies
    Do you know that you are born?
    Rental levels were frozen, as a temporary measure, by Lloyd George during WWI. They were still frozen at the same levels nearly 50 years later. So honest landlords were spending 90-120% of their rental income on maintaining the properties (excluding any exceptional costs). Hence we got Rachman who bought properties cheap from those desperate to sell. MacMillan’s relaxation of WWI rent controls did NOT provide landlords with a decent return on their investment, just got most rents up above maintenance costs Dredging my childhood memories gives rent for a respectable*, rent-controlled two-bedroom north London flat at 47.25 Mars Bars per week, but I cannot remember whether or not that included rates.
    The only time I got to see the P&L data was that the last landlord who had sold out rather than let me take responsibility for the tenants (because I should have cheerfully subsidised them until they died of old age – one of them was 90+ and most had been tenants since I was born) had made a loss on lettings every single year since she had inherited the houses/flats.
    “a year’s profit” – what does it look like?
    *One tenant bought his flat and then sold it to two barristers (married to each other)

  12. JamesV, while a mortgage is not tax deductible, the imputed rent from home ownership is and so is any capital gain. If my rent is £1000 a month I have to earn just under ( previously just over) twice that to pay it, so if I chose to sell my house and buy another asset that paid me an income sufficient to pay the rent I should need double the yield. Thus a 5% yield to an evil buy to let landlord would value the house at £240k, but I would need an asset twice the size or double the yield compared with the imputed rent of owner occupancy. Hence home ownership is one of the few ways to starve the parasitic state – until Richie starts taxing imputed rents that is- coming to a second home near you soon no doubt.

  13. @ MarkT
    I think you have a weird idea of “tax deductible”. Imputed rent is NOT subtracted from income – it just isn’t added to it any more. Are you saying that I ought to pay less tax if I turn my house into an unsanitary hovel? Or if I sell my house and live in a hotel,as a few ultra-rich choose to do?
    What is the price of a house on a 5% yield to a virtuous buy-to-let landlord?
    Also you assume that every house-owner and tenant pays tax at a marginal rate of 50%. I don’t. If you do you need to check the terms of your double-taxation treaty since the top rate in the UK is 45%.

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