Members of the UK200Group respond to calls from property investors to create Capital Gain Tax relief
Members of the UK200Group of independent accountancy and law firms have today responded to calls to lower Capital Gains Tax (CGT) on properties to help investors.
The Residential Landlords Association (RLA), Britain’s largest representative body for buy-to-let investors, has called on the government to provide tax relief to investors on the CGT they are required to pay when selling their rental properties to first-time buyers.
The RLA proposal is aimed at reducing the overall amount of CGT paid by investors when they sell their properties.
CGT is one of the biggest tax concerns for the buy-to-let sector. However, because the buy-to-let industry has grown so fast, much of the potential CGT liability is yet to be realised by the Treasury.
A survey of more than 1,500 investors by the RLA found that around two in three would be “more likely to sell” if their CGT liability was reduced, while 77% would consider selling if the tax was removed altogether.
Jonathan Russell, partner, UK200Group member firm ReesRussell: “CGT is a significant barrier preventing liquidity in the domestic housing stock. Because residential letting is not seen as a business activity as regards CGT, private landlords are frequently deterred from selling because of tax charges. This means that with the growth of the private landlord, mostly in the smaller properties, their properties are less likely to come back on the market.
“A tax incentive to sell to first-time buyers could well encourage private landlords to sell, to increase the available property and possibly reduce prices for first-time buyers.
Robin John, director, UK200Group member firm Wellden Turnbull: “I think this comes back to a point that has generally been made, in that high rates of CGT do not necessarily maximise revenue. I understand that the best yielding year for CGT was when it was a flat rate of 18%.
“High tax rates serve a useful purpose for politicians to be able to say that they are extracting money from the rich, but the reality is that when it comes to raising money, they are not always that effective.”
Stuart Harries, partner, UK200Group member firm WBV: “Landlords are certainly feeling that they are in the firing line following the Chancellors recent budgets. Following the RLA’s comments, extending the Entrepreneurs’ relief to buy-to-let investors would make sense from a landlord’s perspective and would allow first-time buyers to acquire their first homes, which would certainly enable first time buyers to contribute and help stimulate the economy through goods they would buy for their new homes and ultimately increase the VAT revenues for the Exchequer.”
Duncan Montgomery, tax partner, UK200Group member firm Whittingham Riddell: “We help over ten thousand landlords, of many shapes and sizes – and those that invested in property from 2005 to 2008 are generally back in positive territory now some years later and are looking forward with an eye to gains. That means that any proposal that generates tax relief would be welcome. The tricky bit would be policing the qualification of first-time buyer status and policing any certification, to make sure that it is done properly. That cannot come from HMRC, who are doing their best with what resources they have, so a new system may be open to discredit if not properly put in place.
“Of more value to many would be ensuring fair relief for interest, or allowing rollover between residential properties when a portfolio is being tweaked. That would free up many properties and allow the bottom end of the market to be released to first-time buyers as many landlords keep the cheaper properties they first bought and would dearly like to move upscale, but are tethered by gains in property. Roll on rollover for let property!”
