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BM Solutions ‘wrong’ to ignore limited company buy to let ‒ analysis

  • 07/01/2020
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BM Solutions ‘wrong’ to ignore limited company buy to let ‒ analysis
Intermediaries have argued that BM Solutions is making a mistake by focusing solely on buy-to-let properties bought in an individual’s name.

The lender last month said that it was not an area of the market it was considering, over concerns that landlords may not be receiving adequate advice.

However, brokers have argued that this is the wrong move, with some suggesting that borrowers buying in their own name are less likely to have sought out proper tax advice.

Don’t try to be an accountant

Adam Hosker, director of Bespoke Finance, said that it’s important for brokers to signpost the issues and suggest clients have a conversation with a good accountant.

He added: “It’s as unwise for us to try our hand at accountancy as it is for accountants to provide mortgage advice.”

David Sheppard, managing director of Perception Finance, said that most of his clients who want to purchase new buy to lets already have some in their own name already, but have been advised that future purchases should go through a limited company.

“That said, we do have a tax expert we can refer clients to for this advice if they are unsure,” he continued.

Advise on funding, not tax

Martin Stewart, director of London Money, said that a broker should be “the last person” a buyer should consult on how to structure a limited company purchase, adding that his firm insist that anyone looking to buy in this way speaks to their accountant first.

Our job is to advise the most suitable way to finance a purchase, not advise on its most suitable tax wrapper,” he continued. 

“Good luck to those who propose a one stop service but as we know, tax changes can be reactive and retrospective so they need to be very confident the tax rules and regulation won’t change throughout the mortgage term “

Lenders should offer both

However Hosker was critical of BM Solutions’ decision to avoid the limited company market entirely, arguing that just because some borrowers are receiving low-quality advice “it is wrong to use that as a reason not to offer a financial product”.

He continued: “There is no way you should only offer non-limited company buy to let products. It worries me that lenders may be taking business on their books that is not appropriate.”

Hosker also emphasised that it would be a mistake to view landlords purchasing through limited companies as simply being down to the tax situation, saying “professional landlords heading into 2020 are wanting to build a brand, a legacy, to bring in investors and operate as a business”.

Sheppard said he was “surprised” that BM Solutions had adopted this approach, and added: “I would say the bigger concern would be those that are taking mortgages with this lender in their personal name as they are more likely to be the ones who have not sought good tax advice.”

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