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Treasury does not understand basics of taxation, says damning report

A damning report on taxation in the private rental sector (PRS) has accused the treasury of appearing not to understand 'the basic principles of taxation'.

Earlier this month, 'Taxation without justification' was published by the Institute of Economic Affairs as part of its 'Current Controversies' series.

The paper takes the government to task over its recent changes to buy-to-let property taxation, including Section 24 and the 3% buy-to-let stamp duty surcharge.


It was co-written by Dr Rosalind Beck, a private landlord for over 20 years who has written extensively on the PRS, and Philip Booth, Professor of Finance, Public Policy and Ethics and Dean of the Faculty of Education, Humanities and Social Sciences at St. Mary's University, Twickenham.

The authors make proposals to roll back recent tax changes and suggest a range of other tax reforms with the aim of making the overall tax system for residential property one that promotes better economic welfare.

There are several case studies which are used to demonstrate why the phrase 'tax relief' is a 'misnomer' when used in relation to landlords.

The paper argues that before Section 24, 'the tax position of private-sector landlords involved allowing legitimate finance costs to be deducted from income when they calculated their rental profits'.

It goes on to claim that compared to owner-occupied property, private rented property is significantly discriminated against when it comes to tax. 


"The effect of the measures will almost certainly be an increase in rents above the levels that would otherwise have prevailed and a reduction in the supply of rented housing," it reads.

The authors suggest 'investment in property should be treated like investment in any other business so that all business costs, including business finance costs, are deducted before taxable income is determined'. 

Their suggestions for improving taxation in the PRS are as follows:

- There should be no discrimination between different vehicles for holding property. Thus, the tax position of property held within a corporate vehicle should be no different from the tax position of property held by an individual.

- Stamp duty is a very inefficient tax and should be abolished, even if it were replaced by other forms of property tax.

- If stamp duty remains, it should be charged at low levels and not charged at different rates for owner-occupied and let property.

- A tax on imputed rent for owner occupiers could serve as a replacement for Council Tax and stamp duty. This would have the benefit of levelling the playing field between different forms of property ownership as well as between different forms of income.

You can read the report in full here.

  • Simon Shinerock

    Well this is great, not exactly news but great a credible body is confirming two plus two equals four. The trouble is the leaderless Government shambles isn’t interested, someone told them they get more votes if two plus two equals five

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    • 10 May 2019 08:16 AM

    Remember politics means a tax policy can be absurd.
    S24 is a political policy that doesn't need to take into account GAAP.
    Politics means you can come up with any bonkers tax and not have to justify it.
    You can lie about the policy and lots will believe you like the idiot Shelter and GR.
    Until the politics change S24 will remain.

  • S l
    • S l
    • 10 May 2019 10:40 AM

    get RLA to challenge it? NLA?

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    Just like council tax stupid rules,,,,empty property being refurbished due to last tenant trashing it you get 100% CT, put a single person in and he gets 25% reduction, explain that, even the stupid council bods can't

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    Just like council tax stupid rules,,,,empty property being refurbished due to last tenant trashing it you get 100% CT, put a single person in and he gets 25% reduction, explain that, even the stupid council bods can't

  • S l
    • S l
    • 10 May 2019 11:39 AM

    unless there is a proper department to file complaint and to deal with it, the superior in the council tax office can do whatever they like and refused to fund any organisations that help residents to complaint against the council. they are getting more and more suppressive of residents

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    John Redwood Conservative MP says in his blog that Section 24 Tax should be cancelled.

  • PossessionFriendUK PossessionFriend

    John Redwood should join ranks with Ian Duncan Smith, - perhaps some more politicians will see the light then ( I'm not holding my breath though )

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    • 11 May 2019 08:42 AM

    I don't get why Govt simply doesn't abolish S24 but restricts all new lending on new properties to 50% LTV and stops LL with existing properties from remortgaging them in excess of 50% LTV.
    Nobody has the right to credit and Govt can control it.
    Just doing this would bring the PRS to a juddering halt.
    The SDLT surcharge should akso ve abolished.
    Restricting LL to 50% LTV would prevent the PRS reducing and preserve it in its current state.
    Still loads of properties for sale that FTB could buy.
    Doing this would be politically very shrewd.
    You satisfy LL and GR at the same time.
    GR would be delighted LL were restricted to 50% LTV for new purchases.
    LL would much prefer credit controls than S24.
    Of course with such credit controls LL would need to have a lot more 'skin in the game'
    For that to occur LL will have to take a gamble that investing so much skin won't result in them losing a lot of it if the market 'corrects'
    Capitalism eh!!?
    Not as easy as the socialists think!!


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