Tax – What Tax?

By Matthew Moody | Ask Matthew

Tax is not Taxing

You know how sometimes you can read between the lines and see the bigger picture?

Last week, George Osbourne, in an interview with the Financial Times made a definitive statement concerning Corporation Tax in the next few years. In it, he stated that he would reduce the level of tax to ‘below 15%’, meaning it would be the lowest rate amongst full EU members.

You have to ask, Why make a statement like this now?

In March this year, he claimed he would reduce corporation tax to 17% by 2020, and although this takes it one step further, no timescale was given.

So is this wishful thinking? After all, between now and 2020, there will be at least one general election, and in the current climate, no-one can say who will form the Government of the day. We may even be looking at another ‘Hybrid’ coalition.

So what can we read into this?

Someone quite famously said, ‘I want Landlords to squeal’ or something along those lines when introducing the current raft of income tax changes that affect landlords charging rent in the Private Rented Sector (PRS), and it has to be said that ‘Institutional’ investment into residential leases is not affected by these changes, so is this another way to ‘legitimise’ individual property portfolio building?

A recent Inland Revenue ruling stated that a landlord collecting rent on holiday lets would be deemed a business and should attract the same taxation treatment as a business in allowing expenses for any direct cost item to be taken off the bottom line. So is ‘he’ trying to force landlords to hold property in a structured way, via LLP or Ltd company?

The latest statement would seem to make this strategy more attractive. Essentially a 25% reduction in taxation would be good, although I would suggest that this will be done in a staggered way to avoid a big hole in the finances.

Suggestions are that he has made the statement in the wake of uncertainty in the market for business in general in the UK, to try and make the UK somehow more attractive to the outside world, and appease the big institutions who believe leaving the European Union will damage their ability to compete. Is that a bad thing?

In theory, now that we can look forward to setting our own limits on taxation, VAT, etc and by Mr Osbourne flexing his muscles, despite being a staunch ‘remain’ advocate, we should be pleased they are looking forward.

Or is he trying to make his job safe?

You decide.

If you need any help with how to maximise your income and minimise your tax burden, help is at hand – Just pick up the phone or get one of my free downloads

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About the Author

Matthew founded Your HMO Expert in 2006 and since then have provided the authoritative place on the web to come to find out how HMO Property Investment works and how you can get started.

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