Cost of incorporating our BTL portfolio

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Dear Property118

My wife and I are in early discussions with our Accountant about incorporating our BTL portfolio.

We mentioned this to two of our friends who have utilised your services to incorporate and were very impressed with your services

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Property investments led council into debt

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The Council is now trying to sell commercial property assets worth £600m after its property investment spree went horribly wrong. The move is part of a rescue plan imposed on it by Government ministers.

Slough Borough Council is not the only council to have invested in commercial property, and now feeling the pinch. With interest rates at rock bottom, councillors saw an easy and quick fix to their cash flow problems: income producing commercial property investments.

Lucrative deals turned sour

The trouble is that many of these investments were made outside of Borough Councillors’ and council staffs’ circle of competence, and with a rapidly declining High Street, coupled with the Covid pandemic, many of these seemingly lucrative deals have turned sour. Tenants went bust, properties came empty, and what had been cash cows have turned into cash guzzling liabilities.

Local authority investment in commercial property is now under the spotlight from central Government following these sorts of outcomes. The Treasury is looking at restricting the use of The Public Works Loan Board, stopping lending to local authorities borrowing money for commercial property investments.

Bankrupt council

The effectively bankrupt Slough Council is now overseen by Government appointed commissioners and is being forced to implement a three-year recovery plan

Following the central Government intervention, Slough’s council leaders now say they need over £100m of outside financial support in the financial years 2021-22, a figure which is far higher than their initial estimate of £15m.

The borough is said to have invested £96m betting on commercial property providing them with a steady cash flow of income. That was before Covid hit and some of their investments turned sour. A cinema in Basingstoke is a prime example of one of the hardest hit during the pandemic, with their superstores in Gosport and Wolverhampton probably fairing little better.

Commercial investments for sale

Slough Council is now trying to dispose of around one-half of its £1.2bn commercial property estate, after Government ministers have criticised the council’s leadership for “deeply concerning” mismanagement of its finances.

Slough’s problems are potentially the tip of the iceberg for central Government. These types of commercial investments by councils have been part of an upward trend, and many are likely to cause Government to have to step in to other councils as the pandemic affects their investments and their already tight budgets.

Rob Whiteman, chief executive of the Chartered Institute of Public Finance and Accountancy that carried out a review of Slough’s finances for the Government, has said:

“If we do see any more councils in that position. I think it’s going to be a handful rather than a significant number.

“The decision of the Secretary of State to intervene is really a culmination of several years of mismanagement rather than Covid. Covid may have accelerated their position.”

Councils went on a spending spree

English councils are said to have spent around £6.6bn of their taxpayers’ money buying commercial property over the three years to 2018-19, that’s according to the Public Accounts Committee.

There are now substantiated fears that this spending spree could turn nasty because commercial property asset prices have in some cases lost as much as 50 per cent of their pre-Covid values. The shift towards online shopping and home working during lockdowns tipped many tenants over the edge, cutting these council landlords’ cash-flows off at the source. Not only that, empty commercial buildings quickly switch from an asset to a liability.

Along with nine other councils, Slough was in receipt of £15m after Covid hit as part of Whitehall’s rescue plan to help struggling councils. But in Slough’s case, it was not enough. It quickly and effectively declared itself bankrupt in July after discovering an even bigger black hole in its finances.

The intervention now under Michael Gove’s remit, the local government secretary, is to give Government commissioners the power to override a council’s financial management and strategic decisions if its leaders fail to deliver on a supervised improvement plan.

Kemi Badenoch, a minister in Mr Gove’s department, has said of Slough council that damning reports into how the council is run “paint a deeply concerning picture of mismanagement, of a breakdown in scrutiny and accountability, and of a dysfunctional culture”.

“The council’s contract management is weak and has resulted in rushed procurement, missed exit opportunities, and has delivered poor value for money. There is little evidence that the Council understands the entirety of its commercial investments and their impact on its finances,” she commented.

Ms Badenoch told The Daily Telegraph that the review concluded that Slough “cannot become financially self-sustaining without considerable government support. The council cannot demonstrate a track record of making difficult decisions or of taking decisive action to bring about improvements.”

James Swindlehurst, the Labour leader of Slough council, has said:

“There are still many difficult decisions ahead of us. We are financially in a very challenging place, and we will be asking government for a level of capitalisation direction which has never before been made by a local authority.

“I accept the Government intervention; understand why they feel it is necessary and I look forward to welcoming the commissioners to Slough and working with them.”

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – Property investments led council into debt | LandlordZONE.

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LATEST: Councils begin government-funded EPC clamp-down on rental properties

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Mansfield District Council is one of the first councils to drive improvements at private rental properties that don’t meet minimum energy efficiency standards after winning a £90,000 government grant.

It is one of 59 local authorities in England and Wales who have shared £4.3m in funding from the Department of Business Energy and Industrial Strategy to help them enforce the law.

The cash has allowed Mansfield to hire two enforcement officers, along with administration support, to target landlords with failing properties in a project that runs until the end of March 2022. It is to target 166 properties.

EPC rules

Since April last year, privately rented homes must meet a minimum energy performance rating of EPC band E, making it illegal to rent out homes below that unless landlords have a limited exemption.

The project will give landlords advice on loft insulation, cavity wall insulation and double glazing, but lack of action could result in a fine of up to £5,000 per property and per breach.

Councillor Marion Bradshaw, portfolio holder for safer communities, housing and wellbeing, says although it has identified 166 homes, it suspects the actual number is much higher.

“We prefer to work with landlords to improve standards rather than wave a big stick at them. However, enforcement action is an option if landlords choose not to engage with the project,” says Bradshaw.

Midlands Energy Hub, a BEIS-funded agency that works with local authorities to help deliver the government’s Net Zero Strategy, is supporting Mansfield Council’s project. 

Michael Gallagher, head of the hub, says: “Through improving the quality of housing stock, the whole project looks to target over 95,000 of the worst-performing private rented homes with the ultimate aim of tackling fuel poverty and reducing carbon emissions produced by the domestic housing sector.”

Nottingham, Kings Lynn & West Norfolk and Exeter councils are among those to have also received funding.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – LATEST: Councils begin government-funded EPC clamp-down on rental properties | LandlordZONE.

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60% of landlords used savings to plug gaps left by tenants in arrears during Covid, says NRLA

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Most landlords who handed tenants rent reductions during the pandemic absorbed the losses from their savings, according to new research.

A National Residential Landlords Association (NRLA) poll conducted by BVA/BDRC reveals that 61% of those landlords who offered at least one tenant a rent-free or deferred rent period in the second quarter of the year, had used their savings.

With recent YouGov figures suggesting that 61% of landlords rent out just one property, while 34% are retired with rental income representing all or part of their pension, the NRLA has warned that reliance on landlord savings is not sustainable in supporting tenants facing rent problems.

Government data shows that in April to May this year, 7% of tenants in England were behind with their rent – more than double the number who said they were in arrears in 2019/20, before lockdown measures started.

NRLA chief executive Ben Beadle says sustaining tenancies at the expense of retirement savings cannot continue indefinitely.

He adds: “After months of calling on the government to help tenants who, through no fault of theirs got behind with their rent, we have welcomed the funding now made available to help those affected to pay off Covid rent debts.

“It is now vital that councils ensure tenants who need it can access the funding swiftly. Without this, landlords will be left between a rock and a hard place, either expected to sustain rent arrears they cannot afford or to repossess their properties, neither of which we want to see.”

Last month, the government launched a new £65 million fund for councils to help vulnerable tenants pay off Covid-related rent debts.

Read more on ‘who pays for rent arrears debt’ mountain.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – 60% of landlords used savings to plug gaps left by tenants in arrears during Covid, says NRLA | LandlordZONE.

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Landlords are absorbing losses from their savings

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The majority of private landlords helping tenants out during the pandemic by cutting their rent absorbed the losses from their savings according to new research.

The research conducted by BVA/BDRC for the National Residential Landlords Association shows that sixty-one per cent of those landlords who

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Portsmouth launches novel scheme to help landlords prevent evictions

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A trailblazing new mediation service for landlords and tenants in Portsmouth aims to settle rent disputes and avoid costly legal battles and evictions.

The pilot, run by Portsmouth Mediation Service and sponsored by the city council, offers support from a team of independent mediators for tenants behind on their rent, who can be referred by its private housing team.

Sixteen landlords have already been trained, armed with a ‘restorative toolkit’ in the hope it will reduce the need for repossession court action.

One of very few similar schemes in the country, it has a good chance of success because the local council is engaged in the process, says Alwin Oliver (main picture), vice-chair of the Portsmouth & District Private Landlords Association, a driving force behind the scheme. He has already engaged with some of his tenants, one of whom is on a repayment plan.

“We’ve tried to design something that works and hope it will grow and evolve,” Oliver tells LandlordZONE.

“We have trained landlords in the essential communication techniques so that they can avoid confrontation at the early stages, to get the tenancy back under control using a more sympathetic approach. Once a notice has been served, you’ve closed a door. Mediation works best early on in the process.”

Simple ideas

He explains that this can start with something as simple as putting a note on a rent chase email, suggesting the tenant approaches a Citizens Advice law centre if they need to ask for help.

Oliver adds that it’s hoped there will eventually be a direct link with Portsmouth’s possession courts to flag up cases sooner.

As LandlordZONE reported earlier this week, the government’s legal boss Sir Geoffrey Voss wants to expand the role of ‘dispute resolution’ as an alternative to courts in a bid to speed up evictions and other types of civil litigation.

Following a pilot scheme launched in February, there is an ongoing MOJ consultation into dispute resolution. Several national privately-run mediation schemes also exist.

Read more about Portsmouth landlords.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – Portsmouth launches novel scheme to help landlords prevent evictions | LandlordZONE.

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The cost of Bonfire Night mishaps

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Bonfire Night, with its accompanying fireworks display, continues to be one of the most widely-celebrated events in the calendar. Towns and cities, small and large, will be hosting public displays throughout the country, but with COVID-19 still a concern for some

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MPC voted by 7-2 to maintain Bank Rate at 0.1%

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The Doves in the Bank of England’s Monetary Policy Committee (MPC) voted by a majority of 7 -2 to not increase the Bank Base Rate in the face of current inflationary pressures. They also voted not to alter the current Quantitative Easing program and maintain the level of monetary stimulus.

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Four tax tips for landlords

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Paying tax is an annual and stressful chore for landlords whether it’s stamp duty or income, capital gains or corporation tax.

By revealing some simple tax tips, we hope to help landlords remain stress-free and as safe as possible from paying too much tax and losing valuable spare time.

Our financial chief and property tax expert, Shahbaz Husain, provides five tips to help ensure you stay on top of your taxes.

Expenses claims

Every journey starts somewhere and this one starts with the basics of keeping correct and complete records.

If your records are in disarray, you are more likely to miss something, the most common of which are home office costs and mileage reclaims.

A property accountant can help you set up systems to ensure that you’re not missing a penny of eligible costs. It’s always good to have an extra set of eyes, especially when dealing with things as important as your income.

Limited appeal

Mortgage interest tax calculations have changed in recent years and many landlords are looking to incorporate their portfolios.

But trading through a limited company is not a panacea that will automatically lead to a lower tax bill.

Whether you benefit from this will depend upon a number of factors, including how long you plan to own each rental property, so get your accountant to work out if this is a viable option for you going forward.

Taking time to sit and assess situations properly and really weigh out their benefit for you personally is essential. Professional landlords have the most to gain here, but this can work well for smaller landlords, too.

Capital allowances

Capital allowances are a complex area of taxation that are often ignored by landlords. They aim to give tax relief for the reduction in value of certain assets. They cannot be claimed on your bog-standard buy-to-let, though there are circumstances where your property may qualify, such as HMOs and other multi-lets alongside holiday lets and other types of commercial property.

If you can claim, you could benefit from Annual Investment Allowance, writing down allowance, super-deduction or structures and buildings allowance.

Pump primed

Grants of up to £5,000 were announced in Rishi Sunak’s October Budget Statement and will become available from April 2022 for the replacement of gas boilers with heat pumps.

Air source heat pumps typically cost between £6,000 and £18,000 (depending on size) and this grant forms part of the Governments strategy to achieve net zero carbon emissions by 2050.

Other ways to reduce stress

Whilst not a tax tip in the strictest sense, it is important to ensure you use an accountant that specialises in property.

Ideally, this would be someone that has investment properties themselves, so that they understand the commercial aspects as well as taxation.

Knowing your way around your taxes is integral to staying on top of your property business. But it’s always useful to have a helping hand. Clooper is a huge boon to the landlord looking to cut back on wasted time and money.

Clooper’s developers have worked hard to bring helpful tools to their platform, that any landlord can use.

One is our tenant matching service. After you list your property, Clooper automatically advertises your property portfolio on other major property portals, including Zoopla, Rightmove and Prime Location.

This means that you can sit back and relax while the prospective tenants come to you, and you can choose which you contact to find your perfect match.

It can be easy to get sucked into overspending to advertise on multiple platforms, and in multiple different ways.

With Clooper this is minimised substantially, and you only pay a relatively small fixed fee to get your property professionally advertised and matched to local tenants.

Another added benefit for Clooper users is that tenants are already there on the platform. They’re there waiting for properties, which you can provide.

Instead of wasting time searching through other sites and keeping a manual track of leads for properties, Clooper keeps it all neatly in one place.

Most importantly, you’re still at the helm. You control who you connect with, how your property is described, and who exactly you’re renting to. Clooper merely makes it all that much easier, and significantly less stressful.

With everything in one place, you’re at less risk on missing out on essential information going missing, void periods extending for longer than necessary, and overspending on unnecessary costs.

Sign up for Clooper today and see first-hand how they could help you save precious time and money.

This article does not constitute financial advice. Any reader must take formal advice from a property accountant/tax specialist.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – Four tax tips for landlords | LandlordZONE.

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Tragic consequences of ‘light’ holiday-let regulation revealed by student’s death

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A landlord and tenant have been fined for poor maintenance at a Scottish holiday cottage that led to the death of a guest.

Burghill Farms, a partnership trading as Dalhousie Estates, and Piers Le Cheminant admitted breaching gas safety regulations following the incident when student Thomas Hill was found collapsed in a bathroom heated by a portable cabinet propane gas heater.

Forfar Sheriff Court heard that on 28th October 2015, the victim was staying with his girlfriend and her family at Glenmark Cottage, Tarfside. They had rented the cottage from Le Cheminant, who in turn rented the property from Burghill Farms, which was paid 20% of the rental income he received.

Hill had taken a bath in the bathroom, which was heated by the gas heater. His girlfriend and her family became concerned when he did not appear after an hour so they forced entry when they didn’t receive a response.

The 18-year-old was found collapsed next to the bathroom door and later died. A post-mortem confirmed the cause of death was carbon monoxide poisoning.

Insufficient maintenance

A Health and Safety Executive (HSE) investigation found that both Burghill Farms and Le Cheminant did not have a suitable and sufficient system of maintenance in place for the cabinet heaters and that these were in rooms without sufficient ventilation.

However, the failings could not be proven to be causally connected to Mr Hill’s death. Burghill Farms was fined £120,000 while Le Cheminant, of Poundsgate, Newton Abbot, was fined £2,000.

Hill’s father told the BBC outside the court that his son’s death had been ‘totally avoidable’.

Unlike the PRS where landlords are tightly bound by gas safety rules, holiday cottages are still largely unregulated.

HSE principal inspector Niall Miller says: “Landlords have a duty to maintain gas heaters in a safe condition, which in the context of movable gas appliances includes maintaining an appropriate operating environment.”

Calls for greater regulation of holidays lets have been growing as many private landlords in holiday hotspots have switched from long-term to short-lets.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – Tragic consequences of ‘light’ holiday-let regulation revealed by student’s death | LandlordZONE.

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