The Tax System Explained In Beer

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Suppose that once a week, ten men go out for beer and the bill for all ten comes to £100. If they paid their bill the way we pay our taxes, it would go something like this.

The first four men (the poorest) would pay nothing.
The fifth would pay £1.
The sixth would pay £3.
The seventh would pay £7.
The eighth would pay £12.
The ninth would pay £18
And the tenth man (the richest) would pay £59.

So, that’s what they decided to do. The ten men drank in the bar every week and seemed quite happy with the arrangement until, one day, the owner caused them a little problem. “Since you are all such good customers,” he said, “I’m going to reduce the cost of your weekly beer by £20.” Drinks for the ten men would now cost just £80.

The group still wanted to pay their bill the way we pay our taxes. So the first four men were unaffected. They would still drink for free but what about the other six men? The paying customers? How could they divide the £20 windfall so that everyone would get his fair share?

They realized that £20 divided by six is £3.33 but if they subtracted that from everybody’s share then not only would the first four men still be drinking for free but the fifth and sixth man would each end up being paid to drink his beer.

So, the bar owner suggested that it would be fairer to reduce each man’s bill by a higher percentage. They decided to follow the principle of the tax system they had been using and he proceeded to work out the amounts he suggested that each should now pay.
And so, the fifth man, like the first four, now paid nothing (a 100% saving).

The sixth man now paid £2 instead of £3 (a 33% saving).
The seventh man now paid £5 instead of £7 (a 28% saving).
The eighth man now paid £9 instead of £12 (a 25% saving).
The ninth man now paid £14 instead of £18 (a 22% saving).
And the tenth man now paid £49 instead of £59 (a 16% saving).

Each of the last six was better off than before with the first four continuing to drink for free. But, once outside the bar, the men began to compare their savings. “I only got £1 out of the £20 saving,” declared the sixth man. He pointed to the tenth man, “but he got £10”

“Yes, that’s right,” exclaimed the fifth man. “I only saved £1 too. It’s unfair that he got ten times more benefit than me”

“That’s true” shouted the seventh man. “Why should he get £10 back, when I only got £2? The wealthy get all the breaks”

“Wait a minute,” yelled the first four men in unison, “We didn’t get anything at all. This new tax system exploits the poor”
The nine men surrounded the tenth and beat him up.

The next week the tenth man didn’t show up for drinks, so the nine sat down and had their beers without him. But when it came time to pay the bill, they discovered something important – they didn’t have enough money between all of them to pay for even half of the bill.

And that, boys and girls, journalists and government ministers, is how our tax system works. The people who already pay the highest taxes will naturally get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy and they just might not show up anymore. In fact, they might start drinking overseas, where the atmosphere is somewhat friendlier.

David R. Kamerschen, Ph.D.
Professor of Economics.

For those who understand, no explanation is needed.

For those who do not understand, no explanation is possible.

Show Tax Consultation Booking Form

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The UK’s leading property investment event arrives in Kent for its fifth year after sparking nationwide lobbying in support of landlords and investors

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The National Landlord Investment Show, the UK’s leading platform to connect landlords and investors with suppliers in the buy-to-let market, will arrive in Kent for its fifth year on 26th September 2017. Taking place at the Kent Event Centre, the show will be its 51st to date.

Expert property investment advice
1,000 landlords, investors, developers and property professionals will be able to connect with over 80 exhibitors specialising in buy-to-let, as well as receive expert advice from ten seminars taking place throughout the day, presented by leading industry experts. The seminars will focus on areas such as landlord tax advice, legal, evictions, finance, buying at auction and investment opportunities.

Unbeatable national press coverage
It’s been an unbeatable few months for the show, which brings over

20,000 landlords through its doors each year. With its June event at

Olympia sparking off lobbying to Parliament by its guest speaker Iain Duncan Smith MP, the show gained national and industry press coverage on its speaker panel around prohibitive landlord laws. With expert speakers and property professionals at the Kent Show, visitors can expect this to be one of the topics addressed and debated this September.

Exhibitors include renowned suppliers such as Clive Emson Land and

Property Auctioneers, Tenancy Deposit Scheme (TDS), Nova Financial, Ikea, KM Media Group, Royal Bank of Scotland, Southern Landlords Association and Total Landlord Insurance.

Seminars
The seminars are free to attend for visitors and on a first-come, first served basis and are a perfect place to get advice and an in-depth understanding of the investment opportunities available – in the Kent area.

Steve Hanbury, the Event Director states, ’No other property investment show in the UK provides this level of independent advice from such a range of experts and leading service providers in the market’

Tenancy Deposit Scheme, who are exhibiting for the third year running, attest to the popularity of the show, ‘National Landlord Investment Show is a really well run event and has gained the popularity it deserves within the industry.’

Registration for the Kent event is free at landlordinvestmentshow.co.uk

The event is running from 09.00 – 15.30 and tickets are complimentary.

Register free at landlordinvestmentshow.co.uk

About Landlord Investment Show
National Landlord Investment Show is the UK’s leading property investment exhibition, providing solutions, networking and advice for new seasoned and investors in the buy-to-let market. Established in 2013 and operating in property hotspots throughout the country, it has now run 44 shows successfully, and has provided property investment solutions for over 21,000 landlords in the last 12 months alone, a growth of 31% since 2015.

landlordinvestmentshow.co.uk

Landlord Investor Magazine is subscription-based and available in both print and digital formats with 11 issues each year. It offers advice, features, and news, and helps property professionals keep up to date with essential industry developments.

Subscribe at landlordinvestormagazine.co.uk

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – The UK’s leading property investment event arrives in Kent for its fifth year after sparking nationwide lobbying in support of landlords and investors | LandlordZONE.

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End of tenancy and derelict car on driveway

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I have a property that is about to be vacated. The tenants have had a car on the driveway that has not moved for about 2 years.

The tires are flat, the brakes are locked solid and I’ve been told it will not start. I’m worried that the tenants will leave it behind when they vacate and would like advice on what I can reasonably do regarding how long I must store it for, how much I can charge for ‘storage’ since it will effectively just be on the drive of the property and whether or not I can legally have it taken away by a scrap yard.

Many thanks

Chris

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Is a Property Partnership future proofing my business?

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My partner and I have a portfolio of 10 properties in joint names which we fully self-manage including lettings and repairs. They are singe let houses, not HMO’s. We treat this as a business as it is our main source of income. I’ve read quite a lot about the potential advantages of being a property partnership, particularly for future incorporation (SDLT relief).

We acquired our jointly owned properties as tenants in common with prescribed shares and our overall tax position regarding S24 is pretty good. We won’t get hit until year 4 and although annoyingly unfair it’s not likely to be a major problem. Our current strategy is that any future acquisitions will be through a limited company which we have up and running otherwise we would be hit further by S24 tax.

We have in effect been operating as a partnership with our 10 properties and certainly hit the 20hr time committed to the business threshold (Ramsay case). We also created a formal partnership agreement last year. I intend to submit a partnership return alongside our individual tax returns to register us as a partnership with HMRC. The aim being to potentially incorporate in the future. I don’t really need to incorporate now and we take income from profits but may want to in a few years time. The full implications of S24 will be in place and having all our properties within a company structure may well be preferable.

To register as a partnership with HMRC my understanding is that we will have to obtain a partnership UTR and submit

– Partnership Tax Return form SA800
– Partnership Trading and Professional Income form SA800TP
– Partnership UK Property form SA810

Is anyone else taking this approach and have any useful insights and advice.

Any advice on a couple of things I am also uncertain of are welcome.

1. Whether we are considered a Trade/Profession Partnership or Investment Partnership. I am assuming that as a Partnership we are running a business or profession in letting and managing rental property as opposed to an Investment partnership which sounds a lot more of a passive activity.
2. Does registering as a partnership have any impact on our individual tax status, for example, I have carried forward losses to offset against rental income (net profit) which I would of course like to continue to use.

Thanks

Adrian

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Hammersmith and Fulham Discretionary Licensing

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Hammersmith & Fulham have confirmed that they have just launched a discretionary licensing scheme. Nearly all privately rented properties in the borough need to be licensed.

They have released two new licensing schemes in addition to the mandatory licensing scheme.

The three types of property licences are as follows:

Mandatory licensing
This applies to houses in multiple occupation, which must:
• comprise three or more storeys (for guidance on storeys please refer to Statutory Instrument 371 The Licensing of Houses in Multiple Occupation (Prescribed Descriptions) (England) Order 2006).
• be occupied by five or more people and two or more households (A household can be a couple, one person or several people provided they are all members of the same family, including half-relatives, foster children etc.). However, an individual with five friends is not a single household, but six.
• share either a bathroom, kitchen, shower or toilet.

Additional licensing
This applies to houses in multiple occupation, which must:
• comprise three or more persons who form two or more households
• share either a bathroom, kitchen, shower or toilet.

Selective licensing
This is applied to all private rented properties on certain designated streets, please see list of streets attached.
For more information on our property licensing schemes, application, frequently asked questions and answers and list of streets that have been designated under selective licensing, please visit the Hammersmith and Fulham’s website: www.lbhf.gov.uk/propertylicences

To apply for the licence you will need to pay a fee online www.lbhf.gov.uk/propertylicences
You will need the following information:
• Freeholder details
• Mortgage details
• Leaseholder details
• Contact details for all interested parties
• Limited companies – Companies House registration number
• Number of people living at the property, their names and tenancy start dates
• Room sizes
• Fire safety details: provision of fire doors, smoke alarms etc. If you do not have fire safety provision please say “None”, “0” or answer as appropriate.
• Your membership number, if you’re a member of a landlord association or the London Landlord Accreditation Scheme (LLAS).

Documentation you may be required to upload online:

• Gas certificate: If your property has a gas supply, you’ll need to supply a copy of the most up to date gas safety certificate.
• Property plan: For mandatory or additional licences only, please find enclosed a template which illustrates the level of detail required.

For more information please feel free to contact us non the form below.

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Private landlords “help fill social sector gaps” says RLA

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Housing Benefit:

National Housing Federation (NHF) Chief Executive, David Orr, claims that Tory cuts to affordable homes are responsible for the UK housing crisis, but this is refuted by the Residential Landlords Association.

The NHF, which opens its annual conference next Tuesday, says that a massive reduction in Government grants to social landlords has been identified as the primary cause for the deep fall in the construction of social housing over the past seven year.

Mr Orr claims that this massive reduction in government grants to social landlords is the primary cause for the deep fall in the construction of social housing over the past seven years.

According to the NHF, in 2016, just 37,985 “affordable” homes were built in total, almost a third lower than the 53,917 constructed in 2009.

Mr Orr told the Independent newspaper he estimates that around £9bn in public money is going each year in housing benefit to private sector landlords, almost double the amount of 10 years ago.

“That money is not being used to build new homes. It’s dead money from the state’s point of view”, he says. When housing associations make any kind of profit they use it to build new homes,” Mr Or said.

However, in a press release from the Residential Landlords Association Tuesday 19th, its Policy Director, David Smith refutes these claims by the NHF.

Mr Smith says that private landlords are now “filling the gaps” left by the social housing sector.

Responding to the call by David Orr, to divert money from housing benefit paid to tenants in the private rented sector to social housing providers, David Smith, said:

“The private rented sector plays an increasingly important role in housing some of the poorest and most vulnerable tenants, many of whom have already been let down by social housing providers.  Local authorities are now dependent on the PRS to meet their homelessness obligations.

“It is also wrong to claim that private landlords do not invest in new housing.  Off-plan purchases by private landlords are key to unlocking new developments, providing badly needed finance for new homes, up-front.

“The RLA has long argued that we need more homes to be built, across all tenures, but recent government policies have stalled the housing market.  Instead of seeking to split the housing sector, the NHF should be working in partnership across the housing sector, to press the Government to adopt investment-friendly policies that will kick-start housing growth.”

The RLA represents over 50,000 private sector residential landlords in England and Wales.

https://www.rla.org.uk

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