Tax trap hits portfolio landlords eager to help Ukrainian refugees

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Some landlords hoping to offer properties to Ukrainian refugees will be hit with huge tax bills because the tax office has not updated its rules around the government’s resettlement scheme.

The Enveloped Dwellings rule was designed to stop people buying properties tax efficiently through companies for personal use, or leaving them empty. Those landlords who own a property through a limited company must pay the annual tax if they don’t receive any rent, which works out at £3,800 for every home worth between £500,000 and £1m and £7,700 for those between £1m and £2m.

Generous people

Tim Walford-Fitzgerald, of accountancy firm HW Fisher, told The Telegraph that one portfolio landlord had a £700,000 home he wanted to make available to Ukrainian refugees, but faces a £3,800 bill if he does. Walford-Fitzgerald called on HM Revenue & Customs to grant an exemption to landlords wanting to let properties to refugees for free. “The rental market is red-hot at the moment,” he told the paper. “These are generous people who are willing to forego their income for the greater good and HMRC should not be dumping a bill on them.”

The tax trap will catch out those landlords who incorporated their property portfolios to make their business more efficient; according to investment specialist Thirlmere Deacon there were 41,700 buy-to-let incorporations made in 2020, an increase of 23% on 2019, taking the total number of buy-to-let firms to 228,743.

Government response

A government spokesman said: “We are currently looking into this and we will publish further details in due course.”

There has been an enormous groundswell of support for the Homes for Ukraine scheme across the UK, including from tenants, but in England, families who have applied to be sponsors are complaining that the system is overly complicated and lengthy.

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