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HMRC’s tax revaluation ‘is stealth tax on landlords’ - claim

Landlords of HMOs are being faced with a revaluation of their properties by HMRC which could result in many suffering tax rises of 300 per cent. 

Areas with the highest number of HMOs have been focussed on by the Revenue, according to an investigation by the Daily Telegraph. 

Trade minister Penny Mordaunt has criticised the revaluations and called on the government to do more to tackle the trend.

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"This is a growing problem and it is arbitrary. It is stopping homes being built because developers' business models become unviable” she tells the newspaper. 

And Ian Fletcher of the British Property Federation adds: "Local authority budgets have been squeezed for more than a decade, so they need ways of getting more money. There is only one way this will go and that is up”.

The newspaper says many HMO owners pay council tax and other fees on behalf of the tenants, who are then given a single monthly all-inclusive charge. 

So although tenants will ultimately pay the additional council tax, the landlord must fork out for it initially, with some landlords claiming it is a stealth tax. 

 

The Telegraph cites Daryl Brewer, a landlord in Portsmouth, which is in the top 20 local authorities in the country for HMOs, as saying the situation is “an absolute mess.”

The Valuation Office told him that his six-bed property let to six individual tenants has now been reclassified as six different dwellings - meaning his council tax has quadrupled from from £1,821 to £7,287.

A spokesman for the Valuation Office, which is part of HMRC, tells the Telegraph: “The amount of tax any assessment will yield is not a consideration.”

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  • George Dawes

    Always take the easy way out while Amazon ,Apple etc etc just get off Scott free

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    If your model is to increase yield by creating distinct lettsble units you shouldn't really be that surprised when the council comes looking for you....and I say this as a landlord with multiple properties.

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    Its all one sided is it not enough to be saddled with outrageous costly unjustified HMO licensing Schemes and Section 24 without adding another unjustified burden to give a further advantage to Big Developers that are already getting huge chunks of tax
    payers money and collusion to get young to buy. Council tax the most unfair tax. Poll tax had merits where everyone paid something but now millions pay nothing, not all to do with letting properties either and it went up last year in ours by 5.9%.

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    This is simple. If the council want to change the property from one dwelling where the landlord is responsible for the council tax to multiple dwellings, then the tenants should become liable for their individual council tax like any other property. The council can then do all the chasing and leg work to collect, leaving the landlord to collect his rent without worrying about council tax bills!

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    I totally agree.

    This is the case with normal rental properties although I have had fights with the council trying to make me pay the arrears.

    I have successfully resisted and only needed to pay from the end of the lease, not from an earlier date when the tenants left without notice.

    Now that the SNP have banned fixed term tenancies, I will resist until a new tenant is in place as legally I can't terminate a tenancy unilaterally which means it's still in place right up to the date a new tenant moves in.

    I bet that's a consequence the SNP government and councils didn't take into account!

     
  • Matthew Payne

    HMO model has had its day with all the extra costs and admin, I know so many LLs that are proactively converting to single household ASTs. Ill put money on it not being long before the government is complaining we have a crisis in a shortage of house shares for young renters & students. Doh!

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    As i have said for a few years now on a number of forums..... we are sheep to be sheared ! It will never stop, the PRS ' game ' is up, only the very hardiest will keep in the race.

    I am out in 2026, but i do feel for my HMO compadriates (i do not own any HMO's).

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    By disincentivising HMO properties, many single tenants will be made homeless.

    I don't suppose HMRC cares as that's a different department that will pick up the tab.

    Time we got some realistic joined up Government!

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    Death of the HMO, well that's what government and councils wanted, but what happens to those tenants ? they cannot afford to rent a flat or house.

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    "The Valuation Office told him that his six-bed property let to six individual tenants has now been reclassified as six different dwellings".

    To be habitable doesn't a dwelling need a kitchen. So one shared kitchen between six bedrooms would be one dwelling. Six bedrooms each with a kitchen and bathroom would be six dwellings.

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    Another case of making up the rules as required to suit the desired result.
    The piecemeal approach of the government precludes any attempt at business forward planning as you never know when the rules are going to change, or how the new rulles are going to be implemented.

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    I never wanted HMO’s that were invented by outside’s and forced upon me doing enormous damage me and cost to my letting Business, now costing me another £10’000.00 plus for Council Application fees alone, not counting all the requirements costs and Compliance Certificate’s necessary to make the Applications. I know and appreciate all my time / labour is considered nothing and a free service for ever, but if I use anyone in a suit it £300. per hour + vat, not withstanding the fact they were all licensed at least twice before some three times, one will be a fourth time. Are the Council’s really shouting about unaffordable Rents that they are in a big way responsible for ? It also seems to me the Application fee has gone up from £578 on 2006 to £1550. for a 3 bed Terraced house (one receipt I could lay my hands on) surely not such hypocrisy.

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    In our area we have very few HMO s if this happens to me i will have to evict and sell immediately
    My tenants are lovely hardworking people on minimum wage initally i imagined the market would be for young people but now i find they are middle aged divorced women who mainly work in care and couldnt possibly afford to rent a flat or house even if there was one to rent. In Devon they are all holiday lets. The extra 100 ponds a month would kill them financially they have to run cars as no public transport to visit elderly clients in country villages
    Horrible to see really hardworking people at their lowest being pushed under

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    Andrea. I couldn’t agree more most of my Tenants in the main are wonderful people easy to get on with but many in poorly paid jobs. Suppose they were to find similar accommodation locally in the market well not a hope all my rents are below market price in their area.
    I think you are lucky to be in an area of not many HMO’s and perhaps possibly not in an area of high density of prime location like London and near underground Tube Stations where the Big Developers want you out with Government support to Build Sky high Blocks of Flats to make a killing and take control whether for letting at very high rents, part buy part rent rip off schemes or sell at £6k / £7k a m2 to the young with tax payers help, either way they want us gone.

  • Tara Meeks

    Nothing can surprise me these days, its as if the lunatics have been running the asylum for a very long time now.
    HMO's play an important part in many cities. In many areas where we have HMO's in Manchester - the council don't sweep the streets anymore, they are filthy.
    The government are going about the housing crisis in completely the wrong way. By attacking decent landlords in the PRS is not the way to go about it. What will happen is that the very large housing companies will own all the properties eventually .......

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    Tara , you are right the Current Council’s are Rubbish and not capable of running a Borough don’t earn their money and worse than useless. They didn’t sweep the leaves at all in some Boroughs in London 21 / 22. Roads flooding no one bothering, gulleys blocked, main drains silting up creating big cost in the future. Worst part is Asphalt crumbling because of surface and sub structures saturation. I see Roads (Harrow Road & Bridge Water Road) that’s only been re surfaced 2 years ago breaking up and dangerous potholes already appeared. How many billions is this nonsense costing all for not sweeping the leaves. I see ponding all over the place even at official pelican crossing out Sudbury Hill tube Station for weeks you’d need wellington to cross there, plus people getting splashed and to top it all they have spent hundreds of Thousands up grading the pavements and putting lifts in the Station because of the additional thousands of Flats being built in close proximity. So they have an Official crossing where they can’t cross.

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