Setting up multiple companies to separate business interests can seem very straight forward. There are however important considerations. We explore the implications of owning too many companies.
June 2024 Property Newsletter
19 June 2024
Property Investors & Developers
Bank of England interest rate announcement June 2024
On 9 May 2024, the Bank of England announced that the interest base rate will be held at 5.25%.
The governor has said that he is “optimistic that things are moving in the right direction” but needs to “see more evidence” of falling inflation before cutting the interest rate.
When may there be an update?
On the 20th June the Bank of England held the base rate at 5.25% for the seventh time in a row.
Despite headline inflation falling to the Bank’s target of 2%, the Monetary Policy Committee chose not to cut the rate yet.
The decision saw seven members vote to maintain the current rate, while two members voted for a reduction to 5%.
Inflation
Andrew Bailey, the Bank’s governor, explained that policymakers “need to be sure that inflation will stay low” before reducing rates.
Concerns about ongoing high inflation in the services sector contributed to the decision.
However, the committee suggested a cut could be considered at the next meeting in August if inflation trends remain favourable.
Economists and traders are still predicting a rate cut in August, which could impact mortgage and savings rates.
Construction Industry Scheme: 2024/25
HMRC’s recent Agent Update 118 summarised several changes to the Construction Industry Scheme (CIS) that took effect from 6 April 2024.
What has changed?
The first change adds compliance with VAT filing and payment obligations to the compliance test for gaining and retaining Gross Payment Status (GPS).
In addition, the grounds in which HMRC can immediately cancel GPS in cases of fraud will be extended to include VAT, Corporation Tax Self Assessment (CTSA), Income Tax Self Assessment (ITSA) and PAYE (Pay As You Earn). If HMRC has grounds to suspect that the GPS holder has fraudulently provided an incorrect return or incorrect information in relation to any of these taxes, GPS can be immediately removed.
Secondly, where certain conditions are met, landlord to tenant payments for construction work will be outside the scope of CIS.
Anything else?
Finally, from 6 April, subcontractors are no longer able to register for the CIS or apply for GPS over the telephone, unless they are digitally excluded (i.e. they are unable to use computers due to disability, old age or religious reasons).
A new digital form for subcontractor registration and GPS applications will be introduced.
Supporting evidence can be uploaded and there will be the ability to save and return to applications.
Agent Update 118 can be viewed here.
General election on 4 July 2024: What does this mean for property landlords?
The Prime Minister, Rishi Sunak has called a general election for 4 July 2024.
It is worth considering what the general election means for those who rent out property.
What are the possible implications?
The biggest implications will be for those who own furnished holiday lets (FHLs).
In the March Spring Budget, the Chancellor announced that the FHL regime will be abolished from 6 April 2025.
To date, no further details have been provided.
In the short-term, it is likely that we will not see any further detail from HMRC before 4 July, because the announcement of the general election has triggered a six-week ‘period of sensitivity’ (previously known as ‘purdah’), during which government departments must refrain from making any politically sensitive announcements.
What if Labour win the election?
The other, and possibly the most crucial, question concerns whether a Labour government would proceed with the plans to abolish the FHL regime.
To date, Labour have not commented on the plans, so we cannot be certain, but as the abolition was originally suggested in a report by the now defunct Office of Tax Simplification, it is likely that a Labour Government would also look to abolish the FHL regime.
The Housing (Scotland) Bill
Consultation on the Housing (Scotland) Bill was published in March and closed on 17 May 2024.
The proposed legislation, the explanatory notes for which can be viewed here, provides for the following:
- The requirement for local authorities to review local rental conditions at least every 5 years. The Scottish Government will have the power to designate rent control areas based on the local authorities’ recommendations.
- Limits to the frequency of in-tenancy rent increases and controls on rent increases in between tenancies.
- New rights for tenants to make certain changes to the property and keep pets.
- The requirement for local authorities and social housing groups to take actions to tackle homelessness.
The main aim of the bill is to keep people in their homes and prevent homelessness.
The content in this blog is correct as at 17th June 2024 See terms and conditions.
