The prospect of large increases in capital gains taxes that may be announced in next weeks emergency budget is causing concern for landlords, who may be faced with large tax liabilities when selling their investment properties.
The Association of Residential Letting Agents (ARLA) has sent out a press release in an effort to persuade the government that landlords are (of course) vital to the rental market and that having sufficient rental properties available is vital to the housing market as a whole.
In short, ARLA want landlord property investments to be classed as “entrepreneurial business activity” for CGT purposes. This means that CGT liabilities for private landlords would be treated in the same way as an entrepreneur investing in a start up business, or helping grow a business.
I can see the point of shielding landlords to some degree, but this is my problem with this approach: Landlords generally do not employ many staff (although they do use contractors, which helps the local economy), whereas a business will generally become more staff intensive as it grows.
I’m generalising here, so please accept that. But what I’m saying is that investment in traditional business seems to me to be more helpful to the economy, particularly when unemployemnt is growing, than the economic activities of private landlords, though I know that they help provide valuable housing.
So will the government smile benevolently on private landlords and classify their investments as “entrepreneurial activity”? I hope they do, but I’ll not be surprised if they don’t.