Mortgage advisers offering advice in the buy-to-let arena have been warned not to get drawn into providing informal tax advice to clients which may ultimately impact negatively on their future tax position.
Speaking at yesterday’s FSE Cardiff at the SSE Swalec Stadium at Sofia Gardens, both Roger Morris of lender Precise Mortgages, and Liz Syms of Connect for Intermediaries urged advisers not to discuss the potentially complex tax positions of their buy-to-let clients.
Morris, in outlining the changing tax situation for landlords, following the government’s impending cuts to mortgage interest tax relief which will begin next year, said that advisers could be inadvertently straying into taxation advice.
He said: “Mortgage advisers are not tax advisers however any mortgage you do now is a ‘tax vehicle’ for those buy-to-let clients. Think about the advice process – you can’t say we don’t give tax advice but then carry on doing buy-to-let mortgages because any mortgage you arrange will directly affect the client’s tax position and tax coding.”
Morris and Syms both said that advisers have to understand the tax implications for clients, and they should be insisting that clients take professional advice from tax advisers and accountants before they proceed.
Morris outlined the potential tax savings that those clients utilising a limited company vehicle to house and purchase new properties within, might expect.
Syms suggested that when it comes to the recommendations advisers are providing clients with, they might wish to offer illustrations for both limited company and individual mortgages. “We know some advisers are providing two illustrations, one for an individual buy-to-let mortgage and the other for a limited company,” she said. “They are then keeping these illustrations on file, along with the recommendation, and the proof that they asked the client to seek the necessary tax advice.”
Syms urged advisers to understand the criteria of lenders’ operating in the limited company and HMO market. “Brokers need to know exactly what the lenders’ criteria is around limited companies and HMOs,” she said.
When asked if landlord clients might think moving to a limited company structure was too much ‘hassle’, Morris replied: “I would say it’s a question of hassle or tax. Is it too much hassle to spend an hour creating a limited company when the alternative is that you could end up paying thousands of pounds in tax?”
Syms added that for portfolio landlords in particular, they were likely to see that utilising a limited company was the way forward.
