Conservative-leaning think tank Onward has unveiled detail of the proposals rumoured to be behind Government plans to appeal to Generation Rent in this month’s Budget.
However, Onward names in its proposals for a tax that was scrapped two years ago – the Wear and Tear allowance.
As EYE reported yesterday, Onward proposes making existing buy-to-let properties exempt from Capital Gains Tax (CGT) if the property is sold to a tenant who has lived there for at least three years.
The landlord would get a 50% exemption from CGT, while the remaining half would be offered to the tenant as a contribution towards the deposit they require to secure a mortgage on the property.
Onward proposes that the Treasury should pay for this policy by tightening other tax reliefs for buy-to-let investors.
Onward’s modelling estimates that this would support the transition of 1m people from the private rented sector into home ownership by 2023.
The think tank also argues that the Government could make other allowances, such as the Wear and Tear Allowance, conditional on the properties being offered on a tenancy agreement of three years or more.
However, the Wear and Tear allowance was scrapped in 2016 under previous Chancellor George Osborne’s reforms.
We asked Onward if it thought that the allowance still existed.
The response we have received does not make its understanding clear. We were told: “We should have used a better term as you’re correct – the W&T allowance was scrapped a couple of years ago.
“I’ve just checked with the report author who tells me W&T still exists but has been more tightly targeted to apply to just replacement of furnishings which is what we mean by ending that bit for landlords who didn’t offer longer tenancies.”
Comments (4)
Landlords have never been able to deduct the cost of furnishing a property for the first time. They can deduct the cost of replacing items that have been worn out by tenant use.
But Neil O’Brien, Conservative MP, attacked this in Onward’s first paper, which was widely derided. https://www.property118.com/onwards-paper-green-pleasant-affordable-incredible-unfortunately/
Now Onward is suggesting that landlords be forced into issuing 3-year tenancies or lose the right to deduct this cost, although Will Tanner knows that currently the average tenancy lasts more than 4 years.
Leaving aside the difficulties of accounting for this, and the effect it would have on the provision of furnished accommodation, this is blackmail.
Blackmail from Conservatives, bullying from Shelter’s Socialists, how low can these politicos go? Are they competing to find out? Or just competing to drive private landlords out of the market and close down the private rented sector?
It’s time Onward and Shelter were shut down.
They also show their ignorance when they suggest landlords only be able to claim the costs of furnishings if tenancies of 3 years or more are granted – on the whole landlords furnish shorter term lets like student lets and HMOs in general as the tenants are mobile and need to regularly move (unless they are renting out the family home for example which is already furnished). On the other hand, for tenants who want to put down roots – families and so on – they will invariably want to rent unfurnished homes. So they would introduce a policy which no-one could benefit from, but many could lose out. As I stated in my earlier critique of their ideas, they imply that when I buy a bed for a tenant it is for my personal use – it must be, if I am not to allowed to offset it as a cost of my business. We would have to say to tenants etc., – ‘the room is empty – you need to purchase a bed, desk, chair, carpet etc’ The mind boggles.
‘the room is empty – you need to purchase a bed, desk, chair, carpet etc’
That is exactly what I say. As a result of taxation changes I no longer furnish any of my properties, no bed, no desk, no chair, no carpet, no fridge, no cooker, no curtains not even a curtain rail – nothing but a bare flat. An unintended consequence of ill conceived legislation?
They really don’t know what they’re on about. They actually think that offsetting the cost of furnishing rental homes is the same thing as the Wear and Tear allowance. It isn’t. As my colleague pointed out on Property118 yesterday, they are so ill-informed, whilst posing as ‘experts,’ that they didn’t realise it had been scrapped.
Their response to PropertyIndustryEye’s question, and also their earlier report a few months ago expose the other part of their agenda which is to try and get legal change to stop landlords offsetting their costs. They call it ‘levelling the playing field’ with owner-occupiers. I have critiqued their anti-landlord fiscal policies previously on Conservativehome. They would extend Section 24 so that no finance costs could be offset for unincorporated, encumbered landlords. and also stop us claiming the costs of furnishing our furnished rental homes. What would be next? Maintenance costs? Gas and electricity safety costs? The IFS, the iea and the Institute of Chartered Accountants of England and Wales have all pointed out how it is absurd, unjust and unsustainable to tax a business but not let it offset the costs of producing that taxable profit.
This new ‘think tank’ Onward is so anti-landlord they may as well merge with Shelter now. Instead of being exposed for the extreme left-wing organisation they are, they have the ear of the Chancellor.