The Law Society has accused the government of avoiding proper consultation and scrutiny in the way it has introduced new buy to let proposals.
They may mean that profits from the sale of buy to let property could in future be subject to income tax rather than capital gains tax.
The measures have been, in the words of the Law Society, “slipped in at the committee stage [in parliament]” by the government, instead of being part of the formal legislation which is subject to a standard consultation period.
“By introducing a significant change in this way, the government is denying the public the chance to consider and comment on these proposals” claims society chief executive Catherine Dixon.
"The way these changes were introduced, in particular without consultation on the draft legislation before it was added to the Bill at such a late stage, starts to feel like legislation by stealth” she adds.
The Law Society's corporation tax sub-committee has made representations to the government setting out how the amendments will materially change some investors' tax obligations - you can read them here.
Dixon says that if the government does not intend to make a material change at the committee stage, it should clarify the language in the Bill before it is passed. The Finance Bill will go before the House of Commons for its report stage on September 5 and 6.
The government has also been roundly criticised by much of the letting agency and buy to let industry for its other changes to landlords’ tax breaks announced over the past 18 months.
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Hopefully the buy to let tax changes will stop landlords buying up all the properties and pricing out first time buyers due to their original tax advantages.
And I thought this was a site for our Professions, how do we get ridiculous comments from BSSF
Not much point in being on here if it is just another SM site for trolls.
Looking at the draft legislation, the Law Society's notes and the technical note released by the government back in March about the upcoming changes, it seems that the intention is to remove the tax advantage for offshore developers, who can avoid paying corporation tax on full development profits. The draft legislation achieves this by removing the territorial restriction in current legislation.
Companies already pay corporation tax on disposals of UK land, so on the face of it, the draft legislation achieves its aims in respect of companies and corporation tax.
The worrying part is sections 77 and 78, which introduce equivalent legislation for income tax, and would seem to treat profits from disposals as trading profits in a broad range of circumstances. It appears that this would, as the LS observes, give rise to an income tax rather than CGT liability in a number of cases.
The current framework distinguishes between trading and investment activity, which the proposed legislation blurs by introducing conditions that the "main purpose" or "one of the main purposes" of acquiring or developing land or property was to realise a gain from its disposal. As the LS states, capital growth is an essential consideration for buy-to-let investors, even though they are engaging in "uncontroversial" investment activity.
One of the problems that has long plagued the buy-to-let sector is the ability of government bodies to agree on a clear distinction between investment and trading and apply it consistently. Patchwork legislation introduced without proper consultation is not going to help.
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