Are Contractors Who Let Out Their Homes At Risk From New Legislation Initiatives?

7 October 2014

Policy changes afoot in Westminster and the wider European political landscape, could well have serious knock-on effects for contractors who rent out property.

From 2016, a European Mortgage Credit Directive will aim to reframe the criteria under which buy-to-let properties are rented out. Crucially, this Directive will look to bring genuine regulation to the buy-to-let market in much the same way as the residential mortgage market currently works.

Why, then, has this change been mooted? And what are the possible repercussions for contractors who are letting property out? We spoke with Umbrella’s Group CEO Stewart Davis for his take on the impending regulatory upheaval:

“The UK Treasury has essentially spotted an easy win here. That is an easy way to be seen to be doing something about a property market that, particularly in the UK’s Southeast, has continued to boom beyond previous expectations.”

“Linked to this boom, issues such as limited housing, soaring property prices and disgruntlement amongst first-time buyers unable to get a foot on the property ladder have become media focus hot spots. Politicians thus need to be seen to acting.”

“Amongst the contracting community are many buy-to-let, and of course let-to-buy contractors. That latter group, especially, may well find themselves amidst a group of homeowners almost absent-mindedly targeted by the new Directive. Many contractors simply let out properties as a result of winning contracts to work elsewhere, on both a short and long-term basis.”

“The flexibility currently afforded to contractors means they can rent out current homes quickly, and take up residence elsewhere, following contracts they have won, often purchasing new property as a result. The new Directive will seek to define this process as a business transaction, reshaping the frameworking regarding taxation for this ‘unregulated’ market.”

“This move will also condemn many contractors who follow the buy-to-let / let-to-buy process to months of mortgage haggling and the prospect of having to take on extra mortgages for properties where previously rental agreements would suffice.”

“The interim answer would perhaps lie in contractors seeking to understand their property portfolio as a business, first and foremost. It would seem from the legislation as it stands that setting up a property portfolio in this manner could avoid costly trouble further down the line.”

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