The potential of Open Finance and the digitisation of tax records

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The world is undergoing huge changes. With coronavirus pushing the economy to the limit, people are questioning the role of established institutions.

And if finance doesn’t work to enable the economy, businesses or individuals, then who is it for?

Before the digital revolution, financial experts were seen as a necessity. They knew how things worked, what everything meant and could provide good advice from the heart of the financial sector.

But now trading can be done by anyone online, with a wealth of information available to hand.

Traditional banking models are already being upended by technology. Through Open Banking, challenger banks are able to connect services digitally, cutting inefficiencies and costs while speeding up transactions.

Open Finance is seeking to build on this model to connect financial services via technology, potentially making the existing financial model obsolete.

Open Finance

Open Finance has the potential to transfer power back to individuals. Not only would this benefit society, but it would help minimise the boom-bust cycles that cripple entire economies.

No individual would be too big to fail, and bailing people out would cost far less, having minimal impact on the economy overall. With more information available to them, Open Finance businesses will be able to use technology to make better decisions instantly.

While it is still very early days for Open Finance, there seems to be an endless raft of possibilities to benefit individuals, businesses and national economies. Faster, more secure, and less risky access to credit can help grow the economy, transforming finance from something that benefits a few wealthy capitalists to something that enables growth in the real economy.

So how else could Open Finance benefit society?

Tax information

Most working people pay income tax, either via self-assessment or PAYE, and we all have tax records with a wealth of financial information that has been verified, at least in part, by HMRC.

This centralised repository of financial information could be put to better use, such as allowing credit reference agencies to better understand an individual’s risk profile or helping to prove income as part of a mortgage application.

Unfortunately, HMRC is a black hole of information ‒ its sheer size and power sucks information in, but nothing comes back out again.

However, with Making Tax Digital (MTD), HMRC are effectively allowing individuals to keep validated tax records on the software of their choice.

Software providers may then be able to use this information to enable certain aspects of Open Finance. The information doesn’t need to be protected by HMRC, it is the individual’s choice and responsibility over how to use their own information.

As MTD software develops, we will see it connected to Open Banking, allowing self-assessed taxpayers to connect their business account directly to the software, leaving the taxpayer to simply check the details, add any adjustments, and click submit.

MRC would then validate the records, providing assurance for any financial institutions using that financial information. (want to keep up to date with all things MTD – Join the APARI Community here)

More growth, lower risk

With access to complete and validated financial information, lenders would be able to more quickly and accurately assess individual risk when considering a loan application. This would speed up the process of applying for a loan for a property purchase.

Take residential landlords, for example. They may own a few properties already, with equity coming out of their ears.

If that landlord wants to obtain another property, they’d need to get their accountant to pull together their paperwork, complete an SA302, and send everything off to their mortgage advisors who would then validate the information before submitting the mortgage application.

The application can then take months to approve, slowing down the process and potentially leading to missed opportunities. Since property sales usually occur in a chain (the owner of the property you are purchasing is usually purchasing another property, and so on), these inefficiencies slow the process down for everyone and can have major impacts.

If, however, mortgage applicants could simply share validated financial/tax records, mortgage providers could use that information to make quick decisions with reduced risk. What’s more, applicants could share only relevant, high-level information, rather than expose their entire financial history.

Individual risk management

Currently, individuals can manage their credit score/risk profile via third party providers like Experian, Equifax and TransUnion.

These credit reporting agencies use limited information, such as credit cards, store cards and loans to assess risk. Individuals need to understand what factors each agency uses to ‘game’ the system.

For example, someone who has always been careful with their money, kept to a strict budget and never taken out a loan or credit card will have a far worse credit rating than someone who regularly uses debt to finance their lifestyle. So, even though they may have amassed a good deal of savings, they cannot get a good deal on a loan or mortgage. With Open Finance, these individuals would be able to quickly prove their earnings, spending, and savings, decreasing their risk profile in line with reality.

MTD software providers will be in a unique position to develop a two-sided marketplace for finance, allowing credit providers to match products to individuals’ risk profiles. When a customer needs a loan, credit card or mortgage, they can simply browse products for which they have already been approved, applying and receiving finance instantly.

Ultimately, Open Finance has the potential to help the UK and other nations recover from the seemingly unending series of crises that have plagued the early 21st century by allowing people to access finance quicker in order to grow their business and personal finances while reducing risk, inefficiencies, and costs.

Want to find out more about Open Finance and how MTD could help make finance more accessible? Submit your questions for the APARI webinar, in conjunction with LandlordZone (30th November 2021) and get the answers you need!

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – The potential of Open Finance and the digitisation of tax records | LandlordZONE.

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BREAKING: Government toughens up smoke and C0 alarm regulations

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Social and private landlords are to face tougher new rules which make it mandatory to fit smoke alarms in all rented accommodation regardless of tenure, and widen the conditions under which they must be fitted.

Revisions to the smoke and carbon monoxide detector regulations also require carbon monoxide alarms to be fitted when new appliances such as gas boilers or fires are installed in any rented home.

All landlords – in both private and social sectors – also now have to repair or replace smoke and carbon monoxide alarms once told they are faulty.

Timothy Douglas (pictured), policy manager at Propertymark, believes the change is both welcome and necessary to improve tenant safety.

“Private landlords have been required since 2015 to provide working smoke and carbon monoxide detectors where applicable in rented property, and the extension of the regulations to encompass gas boilers is a sensible amendment,” he says.

“Propertymark has long called for tenants to receive the same level of protection, irrespective of tenure, and these changes go some way to rectifying that.”

However, Douglas adds that in order for landlords to be able to make necessary checks, they need to be given flexibility and greater clarity.

“The current requirement for alarms to be tested on the first day of a tenancy is impractical for many agents and landlords, and more workable measures are needed.”

Eddie Hughes MP (pictured), Minister for Rough Sleeping and Housing, says about 20 people are killed each year in accidental carbon monoxide poisoning, and many more through house fires.

“I’m proud that the new rules being proposed will ensure even more homes are fitted with life-saving alarms.” Says Hughes:

“Whether you own your home, are privately renting or in social housing – everyone deserves to feel safe and this is an incredibly important step in protecting those at risk.”

The government has promised to update guidance relating to where alarms are fitted and to ensure alarms meet relevant standards.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – BREAKING: Government toughens up smoke and C0 alarm regulations | LandlordZONE.

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Reviewing the results of another demand focussed government initiative is the property market equivalent of Groundhog Day

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Research by GetAgent.co.uk, has highlighted how huge levels of buyer demand spurred by the stamp duty holiday impacted property prices. Last week, the government released its latest house price index providing the first concrete view of the market in September of this year when the curtain finally fell on the stamp duty holiday.

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Bank of England to stop giving hints

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The Governor of the Bank of England confirmed to the select committee that he was not a fan of the bank’s previous forward guidance policy, instigated by Mark Carney.

Forward guidance (hints given externally) of the Bank of England’s economic views led to widespread press anticipation of an interest rate rise at the last MPC meeting.

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Roger Beecroft interview: ‘I’m a landlord, not an investor’

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“I’ve been asked if I’m ever going to buy a sports car, but I’d probably get more use out of a rubbish truck!” jokes Roger Beecroft, a successful landlord and letting agent whose large number of properties means he’s regularly found clearing out former tenants’ abandoned belongings.

Roger, whose properties are in and around Barnsley in South Yorkshire, isn’t afraid to literally muck into the business he’s built up since quitting his travel agent job in 1999.

Since then, he’s ridden out the financial crash in 2008 to steadily build up a portfolio of terraced houses, bedsits, pubs and a hotel that brings in £60,000 a month.

He also has 26 staff working with him, including at the letting agency he originally set up to manage his own houses – two-branch Beecroft Estates – which now looks after 1,700 properties.

Covid hasn’t made an impact on the business, which suffered very few rent arrears, and the strong rental market means he has 99% occupancy and rising rents.

However, he was stuck with a tenant from hell who he was unable to evict due to the ban, and cost Roger £15,000 after flooding the agency’s office from his HMO room above.

“He caused me 20 years’ worth of problems and we had to close part of the office after the computers got wiped out,” he tells LandlordZONE.

Responsibility to tenants

However, this bad experience aside, he believes that landlords always have a responsibility to their tenants.

“I’m a landlord, not an investor,” asserts Roger. “I think it’s wrong to give someone a home then turn them out because you want to sell it. I want tenants to stay forever and I want them to feel secure – and those that have a long-term relationship with me are less likely to ring me up asking me to change a lightbulb!”

His only regret is that he didn’t buy semi-detached rather than terraced houses, as the tenant churn would have been lower and he worries that the sector could be turned on its head by the government.

“They could change the rules and put a stop on private landlords who are becoming too powerful, which would affect everyone.”

But Roger doesn’t believe that landlords have it harder than they did 20 years ago – after all, the time needed to evict someone hasn’t altered, he reasons. “But at the moment, who wouldn’t want to be a landlord?” 

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – Roger Beecroft interview: ‘I’m a landlord, not an investor’ | LandlordZONE.

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Social housing providers finally required by law to install smoke alarms!

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It’s been an incredible double standard to date, but finally, people living in social housing will be safer in their homes under new rules that will mean smoke alarms must be fitted in all rented accommodation, Housing Minister Eddie Hughes MP announced yesterday.

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EXCLUSIVE: Controversial Scots renting reforms to be revealed ‘before Xmas’

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A new strategy for the private rented sector is to be published by the Scottish government before Christmas, its new housing minister Patrick Harvie has told a meeting of landlords convened in Glasgow by MyDeposits Scotland.

He made the comments during a panel debate about the expectation that ‘change is coming’ for landlords and letting agents in Scotland following a power-sharing deal signed between the Green Party and the SNP in August.

This saw Harvie, who is a Green MSP, given a newly-created title of Minister for Tenants’ Rights and the job of shaking up Scotland’s private and social rented sectors.

He told agents and landlords who attended the gathering today that the new strategy would focus initially on more ‘wellbeing’ changes for tenants such as the right to personalise homes and keep pets, before moving onto meatier matters around affordability.

Rent controls

Although he didn’t refer to it directly, this is widely expected to usher in rent controls that will cap rent rises in ‘pressure zones’ and be reviewed on a five-yearly basis.

Three months ago trade body Propertymark warned Harvie that his rent control proposals would be ‘catastrophic‘.

“We want to get to a position where the human right to adequate housing is met for everybody because it’s not being met now,” he said.

“Some of the questions around how we emerge from the pandemic and which measures should be kept for the longer term are the more high level questions that we are keen to consult on, particularly concerning affordability.”

Other measures that some landlords fear include some of the evictions restrictions introduce during the pandemic, particularly longer notice periods, as well as an annual ‘winter’ evictions ban, a measure that has already been retained to a degree in England.

Other speakers at the event include Paul Shamplina, who led the debates and spoke about evictions, as well as John Blackwood, CEO of the Scottish Landlords Association, portfolio landlord and estate agent Jim Parker and leading letting agent Richard Cook.

When the renting reforms are revealed next month, they will soon be followed the English government’s own much-lauded reforms of its rental sectors.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – EXCLUSIVE: Controversial Scots renting reforms to be revealed ‘before Xmas’ | LandlordZONE.

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LATEST: NW England is new buy-to-let hotspot for yields, new research reveals

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The North West is the UK’s buy-to-let hotspot with rental yields reaching 4.41% on an average rent of £790, according to new research.

Regeneration projects in the Northern Powerhouse towns and cities and the London exodus to the north – accelerated by Covid-19 – have driven the rise, while Yorkshire and the Humber have also benefited from investment in the region, delivering yields of 4.33% on an average rent of £697.

Findings from SevenCapital and Zoopla show that Scotland has recorded healthy yields of 4.11% on an average rent of £687 – significantly higher than London where yields are just 2.9% and the average rent is £1,583.

The Midlands and the north of England are expected to show the strongest price growth during 2022, mainly driven by their greater capacity for growth, while house prices are also set to continue rising across the UK – up 9% by the end of this year.

Maximum yields

Toks Adebiyi (pictured), founder and CEO of tenant finding platform Clooper, says rental yields can change from postcode to postcode, so it’s important that landlords conduct thorough research into potential investment outside their current property portfolio locations, to ensure they achieve maximum yields. 

“In Manchester, Leeds and Birmingham, certain postcodes are hitting yields of between 6-12% as property prices are considerably lower than the South East,” says Adebiyi. “Currently, the average UK rental yield is sitting at 3.63%, so anything over that amount can be considered a high rental yield area.”

He adds: “Landlords considering expanding their portfolio into 2022 have the opportunity to acquire highly profitable properties, despite looming interest rate rises and potential issues with finance.” 

Clooper is LandlordZONE’s official ‘Tenant Sourcing Partners’.

Read more news about the buy-to-let market.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – LATEST: NW England is new buy-to-let hotspot for yields, new research reveals | LandlordZONE.

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Repeat rogue landlord escapes banning order despite ‘murky’ and ‘sham’ rental arrangements

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A rogue landlord has dodged a banning order for operating ‘murky bed and breakfast agreements’ after a court ruled he could not be held directly responsible.

Cambridge City Council fined Santiago Jose Hidalgo Ferrin and his company Simple Properties London Limited £12,000 each for running an HMO in Cherry Hinton Road without a licence and wanted to ban him from letting houses for five years. The firm has since been dissolved.

Ferrin was highlighted within an investigation by the Independent national newspaper last year into his rogue activities, and those of his company.

Cambridge Council said that although his tenants had agreed ‘bed and breakfast’ arrangements with Simple Properties Management Limited, five of the nine had lived at the property for more than six months, after Simple Properties London Limited took on the lease in June 2019.

Council officers then discovered that the company had been involved with a licensable HMO in Acton Street, Camden, which resulted in a banning order being made against Simple Properties Management Limited and Miguel Cabeo Cespedes in May 2021. They were keen for the banning order to be made against Ferrin due to this link.

Sham agreements

The tribunal ruled that while the sham agreements were troubling, they named a different company, while the banning order offence relied on within the notice had become spent prior to the hearing, in February 2021. It said there were no longer any concerns about the property.

“Given his lack of involvement with both their investigation and this application, it is difficult to assess the likely effect of any banning order…it is also entirely possible that Mr Ferrin has left the country or that the name is an alias.”

It added: “Although the circumstances of the letting of 308-310 Cherry Hinton Road (pictured) are murky, involving sham bed and breakfast agreements, there was no evidence of any aggravating factors in terms of the behaviour towards the occupants and indeed no evidence whatsoever of Mr Ferrin’s personal involvement, other than his role as sole director of Simple Properties London Limited.”

Read the tribunal judgement in full.

Read more about Cambridge landlords.

Pic credit: Google Streetview.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – Repeat rogue landlord escapes banning order despite ‘murky’ and ‘sham’ rental arrangements | LandlordZONE.

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Pharoah ant colonies can spiral out of control in larger HMOs

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Landlords of large multi-occupancy buildings are being urged to understand the risks posed by a small tropical species. Pharoah ants are tiny, but can create huge colonies that will split if threatened and can potentially spiral out of control, says the British Pest Control Association (BPCA).

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