At the time of writing, less than 2 months remain for existing Welsh Landlords to comply with changes.

What do Welsh Landlords need to know?

On December 1st, 2022, the Renting Home Act 2016 (Wales) changed the way all landlords in Wales rent their properties- making changes and improvements to how they rent, manage, and live.

Instead of using tenancy agreements when they let their properties, landlords must now use a Standard Occupation Contract. Landlords must provide an accurate written statement of this otherwise they will face penalties.

So… Who is affected by the Renting Homes Wales Act Changes?

All social and private tenants will see some changes. This will include how their contracts are provided, how their homes are maintained and how they communicate with their landlords. All social and private landlords will need to comply with the new law and make the necessary updates to their properties and paperwork.

Tenants and licensees are now known as contract-holders and tenancy agreements have been replaced with ‘occupation contracts.’

For landlords, this provides a simpler system with two variations of contracts: Secure and Standard.

Assured/Secure Tenancies commonly used by community landlords will become Secure Contracts.

ASTs (Assured Shorthold Tenancies) and other fixed-term contracts used by private landlords will become Standard Contracts.

A secure contract is always periodic. This means that it continues from one rental period to the next without an end date. People who rent their homes from a community landlord will most likely receive a Secure contract but may also get a standard contract. Some of these may be like those offered by a private landlord although there are other types of standard contracts which may be provided such as an introductory standard contract.

 Existing tenancy agreements converted on 1 December 2022, and landlords will have until June 1st 2023 to issue a written statement to the Contract Holder setting out the terms of the Occupation Contract. For new contracts, this must be completed within 14 days of the occupation date. 

What are Occupation Contracts?

An Occupation contract is the agreement between the tenant or licensee (contract-holder) and their landlord. These contracts can either be a fixed-term standard contract or a periodic standard contract. A fixed-term contract requires both the contract holder and the landlord to commit to a minimum term. Once it comes to the end of the contract, the landlord and the contract-holder may agree to a new fixed term and the contract-holder will be given a further fixed-term contract.

If the contract holder remains in occupation a periodic standard contract is automatically created, and this will continue until either the contract holder or the landlord brings it to the end.

There are no requirements for a fixed-term contract. A periodic standard contract rolls over from one rental month period to the next.

The occupational contract will be set out in a written statement which replaces the tenancy or license agreement. Included in the terms of the contract are- key matters, supplementary terms, and additional terms.

Key matters are the address of the dwelling, the occupation date, the amount of rent and the rental period- whether it’s a fixed or a periodic contract.

Supplementary terms are clauses that have been set out by legislation. These clauses can be removed or changed to meet the needs of the landlord if both parties come to an agreement.

Additional terms are clauses that are not defined by legislation and have been inserted by the landlord.

Model Occupation Contracts:

The Welsh Government has released a model occupational contract which includes model statements and forms for landlords who would like to have a guide on how they should fill it in and what to include. This guide can be found here.

There are a few consequences for committing offences under the Act. These include:

• Fixed Penalty Notices (of either £150/£250)
• Rent Repayment Orders
• Rent Stopping Orders
• Criminal Prosecutions and Fines

Deadlines:

14 days – Written statements must be given within 14 days of the occupation date for new contracts that started on or after 1st December 2022.

1st of June 2023 – Written statements for converted contracts need to be issued.

There are different deadlines depending on whether it is a new or converted contract.

14 days – For new contracts, Contract-holders must be provided with a written statement of occupation contract within 14 days of the occupation date.

31st of May 2023 – This is the deadline for converted contracts already agreed upon by 1st December 2022. However, the government advise that this is best to do it sooner.

Contract holders must be given notice of the information about the landlord- Form RHW2.

14 days – For new contracts, this must be completed within 14 days of the occupation date.

31st of May 2023 – This is the deadline for converted contracts, however, it would be beneficial to issue this information sooner.

Contract holders must be provided with a copy of a valid EPC.

Beginning of the contract. – This is the requirement for new contracts and when it should be provided.

Issued at the start of the conversion. – This is the requirement for converted contracts and when they should be provided. The EPC doesn’t require re-issuing due to conversion.

There are requirements for the protection of the deposit.

Within 30 days of the deposit being paid by the contract holder – For new contracts, this is the deadline.

Landlords should’ve already complied.- For converted contracts, this is already an existing legal duty. It doesn’t need to be re-protected.

There are requirements regarding the Fitness for Human Habitation (FFHH).

Occupation date – For new contracts, the requirements must be met from the occupation date. This does also include carbon monoxide alarms where needed.

Date of Conversion – For converted contracts, these requirements should be met from the date of conversion.

30th of November 2023 – This is how long landlords have to install mains-wired smoke alarms and ensure that an ECR is provided.

Contract Holders must be provided with a valid copy of the Electrical Condition Report (ECR).

Within 14 days – For new contracts, this must be completed within 14 days of the occupation date.

For converted contracts, this must be completed within 14 days of the 30th of November 2023. 

Further Reading

https://www.gov.wales/renting-homes-checklist-landlords-and-tenants-html

https://www.propertymark.co.uk/membership/knowledge-hub/renting-homes-wales-act.html

https://www.nrla.org.uk/wales/renting-homes-wales-act-faqs

Being a landlord is a busy and sometimes stressful business, especially when trying to keep up with legislation. We can help you save time and worry by completing these new contracts for you.

The team of experts at OCG Legal who provide independent legal advice can complete any new contracts for you, saving you time and worry with the service priced from just £250+VAT.

Get in touch to discuss your needs.

Email enquiries@ocglegal.co.uk or vist ocglegal.co.uk

2017 was an important year for landlords in that it marked the beginning of Section 24 (S24). With a restriction on mortgage tax relief, many predicted that landlords would experience huge financial difficulties and the rental market would suffer as a result.

After almost 6 years of implementation, where has S24 left the landlord market?

Even to this day we know landlords are still feeling the pain. More than 29,000 landlords signed a recent petition calling on the government to reverse S24, but responding on the 17th January 2023, the government confirmed they would continue to set mortgage interest relief against rental income only at the basic rate of tax.

 Whilst it would be great if we could see the true impact of the changes on the market without external factors getting in the way, of course it’s never that simple.

 On the face of it, it does appear that the immediate impact of Section 24 was to push many landlords out of the sector given the hard facts. In 2017 there were 2.88 million landlords, and by 2019 there were 2.66 million [i]. Not likely a coincidence.

Landlords have of course faced many challenges since 2017 including: –

• Covid-19 and pressure not to evict non-paying tenants
• The Rise of Build to Rent
• Taxation changes
• Fear of a property bubble
• Proposed EPC policy
• Proposed abolishment of Section 21
• More recently rising interest rates

We cannot say that S24 is the sole factor for landlords leaving the market, but let us look at what experts did predict would happen as a result of restricting tax relief, and where we are today.

Prediction 1: Higher rents and decreased profits

Section 24 was always going to hurt. The big unknown was how landlords would deal with the sudden squeeze on profits. Would they increase rents or possibly absorb them to remain competitive?

Average rents increased significantly between 2017 and the end of 2021, by which time Section 24 was fully implemented. But average rents have been growing for years and they continue to do so. In fact, you only have to glance at a newspaper to know that average rent is not only growing in every region of the UK, but it is at a record high reaching £1,171 in Oct 2022. That’s up 51% since 2017 when the average rent was £773.74 [ii]

But again, rising rents can also be contributed to: –

• Reduction in supply of available rental homes
• High demand for rental properties
• Stamp Duty & Capital Gains Tax changes
• Legal requirements for safety standards
• Upfront letting agent fees ban
• Inflation and rising wages

Whilst we cannot say beyond doubt that Section 24 has pushed up rents, there is a clear correlation between tougher financial conditions for landlords resulting in higher rents for tenants.

Prediction 2: More buy-to-let companies

Tax experts predicted a rise in limited company ownership because landlords could reduce the impact of S24 by transferring ownership of their properties to a new limited company, subsequently paying corporation tax instead of income tax whilst benefiting from other tax incentives too.

 Companies House data would suggest this prediction did indeed come true with more new BTL companies being formed each year. 2021 saw 47,370 new BTL incorporations – almost double the 24,190 companies set up in 2017. [iii]

Analysis from Hamptons also shows that between the beginning of 2016 and the end of 2020, more companies were set up to hold buy-to-let properties than in the previous 50 years combined and yet despite this, there is still only 6% of landlords owning properties in limited companies or a mixture of both. [iv]

Clearly there was a surge in company ownership, but what proportion this represents landlords incorporating their existing portfolios vs new landlords setting up a new company to buy property (regardless of whether that’s the ‘right’ thing to do in their circumstances) needs further research.

Prediction 3: Landlords selling up

With Section 24 hitting many landlords hard, it was predicted that some would decide to exit the market. This we now know to be true, with 220,000+ landlords leaving in the first two years of the legislation taking effect. Apart from S24, the government also introduced lots of new regulation, making the ‘accidental landlord’ think twice about staying in the game.

 The latest English Private Landlord Survey (2021) also showed that twice as many landlords (representing 29% of tenancies) were looking to sell their properties rather than trying to increase their portfolio.

So whilst S24 was arguably the primary cause of landlords leaving the market early on, other factors will now be contributing. Landlords are no doubt under pressure, with the English Private Landlord Survey 2021 reporting that whilst 45% of landlords were owed rent arrears in March 2020, eight months later (and with the Covid pandemic hitting the sector hard) this number had jumped to 75%. The average arrears more than tripled from £1,117 to £3,531. The final nail in the coffin for some landlords.

But where some see adversity, others see opportunity.

The UK’s largest BTL landlord, Grainger Plc openly plan to increase their market share significantly at the expense of landlords leaving the market. They also expect the private rental sector to jump from 4.7 million households to 7.2 million in 2025. [v] This may tell you all you need to know about where the BTL market is heading.

To compete and prosper, smaller portfolio landlords and family BTL businesses do need support. From their membership with the NRLA to working with specialist consultants where appropriate.

At Less Tax 4 Landlords we help make running a rental property business commercially viable for the average portfolio landlord.

And if you’re still unsure if you are in the best possible position, our free initial assessment will let you know if we can help.

[i] https://www.hamptons.co.uk/research#/

[ii] https://www.propertyinvestortoday.co.uk/breaking-news/2018/2/average-uk-rents-increased-more-slowly-in-2017

[iii] https://www.hamptons.co.uk/research/articles/record-47000-new-buy-to-let-companies-set-up-in-2021#/

[iv]https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1078643/EPLS_Headline_Report_2021.pdf  

[v] https://corporatewatch.org/grainger-the-corporate-landlord-cashing-in-on-the-housing-crisis/

We’re pleased to announce that as of Wednesday 1st March 2023, the home for people who want to build, run and grow professional property businesses is moving!

Our London operation (alongside Phare Financial Services, OCG Mortgages and OCG Legal Private Client Services who provide many of our clients with independent advice) will move from 332 High Holborn to 4 Breams Buildings – only a 5-minute walk from our current offices!

IMPORTANT – With our High Holborn office closing on Thursday 23rd February, if your meeting with us falls between the 24th of February and the 3rd of March, and you’ve not already heard from us, then please do double check the address of your meeting.

Marking a new chapter for the business, we’re looking forward to welcoming new and existing clients to our new address: –

Please direct to the relevant company and department at:

4 Breams Buildings

London

EC4A 1HP

Throughout our office move, the Horsham office will remain open as normal and you can still reach us on 0203 735 2940.

#1 Form 17 for Landlords – adjusting the split of property income between couples

Once again, this blog makes the #1 spot for the second year running as the most-read feature on our website.

Whilst most landlords are aware that income can be shared equally by married couples for tax purposes, we receive many phone calls from landlords who are still not aware of the opportunity to make changes to this arrangement.

For help preparing the necessary legal documentation and filing Form 17, contact dot@lesstaxforlandlords.co.uk for a quote.

#3 What is Section 24? Common questions about Mortgage Interest Tax Relief Restrictions

• What are the ‘Section 24’ Tax Changes?
• Will Section 24 Impact my Property Business?
• How will Section 24 impact cashflow?
• What counts as ‘Finance Costs’ in Section 24?
• Will Section 24 ever be repealed?
• Why is the Section 24 Tax Credit a ‘Maximum’ of 20%?

And much more.

#5 PRA Changes: The Impact on Portfolio Landlords

Our 5th most visited blog page is a full summary of the 2016 Prudential Regulation Authority (PRA) changes with a focus on what the changes mean to landlords wanting to borrow additional funds.

If you’re a portfolio landlord in the buy-to-let business and you’ve not had to borrow additional funds from a lender since 2016, then you should read this blog and find out what has changed.

For example, Portfolio Landlords looking for new mortgages will have to ensure they have all the necessary details to hand. A buy-to-let lender may ask for:-

• bank statements
• tax returns
• future liabilities
• SA302s
• ASTs
• rental accounts
• income and expenditure statements
• and a business plan!

More on this and stress testing in this blog.

#7 Case Study- Building a Business to Last Generations

In this blog, we take a closer look at MR W. and discuss the options that he could take to future-proof his property business

And for all the very latest blogs visit our ‘Latest Page’ here

Back in 2017 under the orginal rules, it was trusts who had trustees that met certain tax liabilities that originally needed to register.  But since October 2020, under the new rules, almost all trusts set up during a lifetime will have to be registered – even if there’s no tax liability.

Why the Change? 

The UK Government had to meet its obligations of complying with the fourth and fifth EU Money Laundering Directives but they also wanted greater transparency around the ownership of Trust assets and individuals connected with trusts.

What if I don’t do it? 

Registering a trust is the responsibility of the trustee and failure to do so due to deliberate behaviour on the part of the trustee, could result in a £5,000 penalty per offence. Not only should you register the trust but keep the information up to date to avoid receiving a warning letter.

You will have the option to register the trust yourself or use a tax agent who can register the trust on your behalf.  ‘Obliged entities’ such as ourselves (Less Tax 4 Landlords) must collect proof of registration before establishing a new business relationship with a registrable trust.

The HMRC website quotes, “You will not get a penalty for failure to register or late registration unless that failure is due to deliberate behaviour. If you deliberately fail to register your trust on time, or deliberately do not keep the register up to date, you may have to pay a penalty of £5,000.”

Who should register?

You must register your trust with HMRC:

• To get a unique taxpayer reference (UTR) for example if you’re filling a self-assessment tax return.
• To comply with anti-money laundering regulations

What trusts should be registered?

If your trust is liable for any of the following taxes:

• Capital Gains Tax
• Income Tax
• Inheritance Tax
• Stamp Duty Land Tax
• Stamp Duty Reserve Tax
• Land and Buildings Transaction Tax (in Scotland)
• Land Transaction Tax (in Wales)

The following types of trusts must register even if they have no tax liability:

• all UK express trusts — unless they are specifically excluded
• non-UK express trusts, like trusts that:
  • acquire land or property in the UK
  • have at least one trustee resident in the UK and enter into a ‘business relationship’ within the UK

If the trust is not resident in the UK (non-resident trusts), you must register the trust if it becomes liable for tax on income coming from the UK or on UK assets.

If the trust has a tax liability but this is covered by a relief, you’ll need to register the trust to claim the relief through Self Assessment.

Trusts that do not need to be registered unless they are liable to pay UK tax

Unless it has a liability to UK taxation, some of the trusts that do not need to be registered include:

• If it’s for bereaved children under 18, or adults aged 18 to 25
• If it holds money or assets of a UK registered pension scheme — like an occupational pension scheme
• If it is used to hold life or retirement policies providing that the policy only pays out on death, terminal or critical illness, or permanent disablement, or to meet the healthcare costs of the person assured
• If it’s a charitable trust that is registered as a charity in the UK or which is not required to register as a charity

There are many more exclusions, and you should check what is and what isn’t included by visiting the HMRC website here.

When to register

Non-taxable trusts that were created on or before 6 October 2020

The deadline for registration was 1st September 2022.

Non-taxable trusts created after 6 October 2020

Register your trust within 90 days of it being created or becoming liable for tax.

Taxable trusts that are created on or after 6 April 2021

Register your trust within 90 days of the trust becoming liable for tax.

Taxable trusts that were created before 6 April 2021.

• Trusts that are liable for Income Tax or Capital Gains Tax for the first time
• Trusts that have been liable for Income Tax or Capital Gains Tax before
• Trusts that are liable for other taxes

For more details on the above, please visit government guidelines here.

What you’ll need

The information you may need to provide includes:

• the name of the trust
• the date the trust was created
• to say if the trust is an express trust or not
• details about whether a non-UK trust has a business relationship in the UK
• details about any UK land or property the trust has purchased

You should be able to find these details in the trust deed and from any correspondence that the trust has had with HMRC.

Lead trustees

All trustees are equally legally responsible for the trust, but you must nominate one ‘lead’ trustee to be the main point of contact for HMRC. The lead trustee will receive the trust’s unique taxpayer reference number (or UTR). This is a 10-digit code that uniquely identifies you or your business.

You’ll need to give their:

• name
• date of birth
• National Insurance number and address (if they’re a UK citizen)
• passport details and address (if they’re not a UK citizen)
• telephone number
• country of residence
• country of nationality

If the lead trustee is an organisation, you’ll need to give their:

• organisation name
• organisation UTR
• address
• telephone number
• email address
• country of residence

Summary

Trustees need to be aware of their responsibility to register the trust with the TRS (if applicable) and keep the information up to date.

Registration will almost certianly be required for trusts that are subject to a UK tax liability and non taxable ‘express trusts’.

Who can help me register my trust?

Accountancy services can help you register your trust and providers must be:

• auditors who carry out statutory audit work;
• accountants who provide accountancy services to clients;
• tax advisers and consultants who provide advice to clients about their tax affairs;
• payroll agents that provide accountancy services or tax advice;
• customs practitioners, freight forwarders and similar businesses if they provide accountancy or tax services.

Less Tax 4 Landlords is a specialist multi-disciplinary consultancy that helps property investors and portfolio landlords maximise the commercial benefits of building, running, and growing a recognised professional property business.

If you have an existing portfolio of properties, then please take our assessment to see if we can help you benefit from running a recognised property business.

We provide landlords with unbiased, impartial, and holistic advice based upon:

• Where you are now
• What you want to achieve
• The available Financial and Legal Instruments

Specialising in the PRS (Private Rented Sector), typically we help:

• Growing businesses whose owners are looking to support further growth
• Full Time Landlords looking to plan for their retirement
• Portfolio Landlords at capacity needing to make changes so their business can grow
• Landlords needing to restructure their business due to the ‘Section 24’ tax changes
• Family businesses looking to ensure that the business portfolio can remain intact on succession

This requires an all-round service – which includes (but is not limited to) business consultancy, legal advice, financial advice and tax advice.

Get in touch today by calling us on: 0203 735 2940 or start the Free Intital Assessment