Judicial Review – Landlord Tax Grab

by Mark Alexander

1:00 AM, 26th December 2015
About 3 years ago

Judicial Review – Landlord Tax Grab

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Judicial Review – Landlord Tax Grab

Landlord Tax – George Osborne Policy To Face Judicial Review.

Private Buy-to-Let housing providers have chosen Boxing Day 2015 to begin their fight back at Chancellor George Osborne and his discriminatory tax regime, announced in the Summer Budget, which only targets private landlords with mortgages via the Judicial Review process.

New tax rules will treat mortgage interest as though it is earned income and push many rental property owners into higher tax brackets. Knock on effects can also include increased CSA payments and removal of other vital benefits but Osborne’s tax measures will not affect the wealthiest landlords (those with no mortgages), or indeed limited liability companies which borrow money to fund buy-to-let property investment portfolios.

Social Media has been buzzing in recent weeks calling for legal action to be considered.

The first step to instigating a Judicial Review is to obtain a detailed Legal Opinion from specialist legal counsel. Omnia Strategy LLP, established in 2011 by Cherie Blair CBE, QC, has been appointed.

The organisers of the campaign have launched a fund-raising appeal via the Crowd Justice website. Thousands of landlords are expected to donate funds.

Letting Agents and Mortgage Brokers are also being encouraged to contribute to the fund raising campaign. This is because their businesses are likely to be hit too if landlords stop investing or choose to sell up.

A member of ICAEW commented;

It is a long established principle of taxation that expenses incurred wholly and exclusively for the purposes of the business are deductible when calculating the taxable profits. Clause 24 of the Summer 2015 Finance Bill contravenes that principle and will result in proprietors of property businesses being liable to tax on a fictitious profit – even if the proprietors really make a loss.

The tax change does not just affect new borrowings. Landlords with existing borrowings will be affected. Portfolio landlords will be particularly badly hit.

As a consequence of the tax change, major changes in the private sector will take place. Some landlords will pass on their increased tax by increasing rents. Others will be forced to sell, as they will not be in a position to pay the extra tax demanded by HMRC. Homelessness will increase as some tenants will not be able to afford higher rents and many will be evicted by landlords forced to sell”.

Mark Alexander, founder of the Property118 Landlords Forum said “it is important for the whole country that funding is raised to win this legal battle. Millions of Britons simply do not qualify for mortgages to be able to purchase a home of their own. The number of people seeking to rent privately has been increasing in line with the growth of the population for decades. It is all very well the government having an ambition for everybody to be a homeowner but they must be made to realise that isn’t realistic. The UK has an ever growing reliance on the Private Rented Sector. Investment and building needs to be encouraged, not taxed into oblivion”

In a letter to the Chancellor, Conservative Lord Flight saidA lot of Buy to Let investment has been an alternative to saving for old age via pension schemes.  Up until World War II investing in rented property was the main method of providing for an income in old age.  Given the poor performance of the Stock Market over the last 20 years, it is hardly surprising that many people have opted for Buy to Let investment as an alternative source of retirement provisioning.  But Buy to Let does not enjoy any of the major tax advantages of pension saving, i.e. tax credit on the amount invested and accumulation of income and capital gains tax free within the pension scheme.  The only Buy to Let “tax advantage” has been the ability of the interest cost to be offset against an individual’s income to determine their tax rates/bill – the very thing which you have attacked.”

When Lord Flight referred to offsetting the interest cost against an individual’s income he of course meant rental income only, not total income.  Buy-to-Let interest is not deducted from any other income that a landlord might have – unlike the way MIRAS used to work.

Nor can Buy-to-Let losses be set off against any other income.  A BTL property has to pay its own way.  If it gives rise to a loss, the owner has to make good the loss out of other taxed income.  Landlords do not receive any tax “breaks”.

BTL has increased housing stock by 2.5 million between 1996 and 2013.

BTL was only responsible for one-twentieth of the 150% price increase between 1996 and 2007, which is insignificant.  Prices would have gone up even more if BTL had not financed the 2.5 million increase in supply – and so would homelessness.

Deducting finance costs from rental income is not a tax relief it is normal accounting practice everywhere, and for every business. That is why Lord Flight put “tax advantage” in inverted commas.

Disallowing finance costs for existing rental businesses is iniquitous and will be damaging for the economy.  Rents will rise.  Tenants who cannot afford the rises will be made homeless, to be put in temporary accommodation in whichever part of the country it can be found, at greater cost.

For these reasons, it is vital for private landlords, tenants and the entire rental sector that this funding campaign is successful.

The window of opportunity to submit an application for Judicial Review closes on 17th February 2016.

The Crowdfunding website page for making donations to the legal action fund can be found via a Google search for “Crowd Justice Judicial Review of Clause 24” or CLICK HERE.

Further information link

JUDICIAL_REVIEW



Comments

Angela Bryant

7:33 AM, 26th December 2015
About 3 years ago

Well done Mark and all involved.

I have pledged and shared about this. Really looking forward to seeing the progression of this good fight back!

Happy BOXING Day!!

Angela

Steve Bolton

8:59 AM, 26th December 2015
About 3 years ago

Mark - well done for bringing light to this issue and mobilising many people behind it. Thank you.

Thanks Angela for your support and donation.

Laura Delow

9:07 AM, 26th December 2015
About 3 years ago

I have just emailed 58 portfolio landlords & heads/owners of businesses that serve the buy to let sector (see copy below)
I'm in.
Well done Steve, Chris & Mark & thank you.

Dear Everyone

My apologies for emailing you on Boxing Day but today has been chosen to begin the fight back at the Chancellor; George Osborne & his discriminatory tax regime.

If your are:-

- a But to Let owner with one or more mortgaged properties
- a Tenant
- a Letting and/or Managing Agent for private landlords
- an Estate Agent
- a Business providing insurance services to the buy to let sector
- a Business providing loans to the buy to let sector
- a Mortgage Broker
- a Business providing furnishings to the buy to let sector
- a Contractor who does work for landlords

You will be effected by the Government's new Clause 24 announced in the Summer Budget.

I implore you to first read the Telegraph Article:-

http://www.telegraph.co.uk/finance/personalfinance/investing/buy-to-let/12067842/Buy-to-let-investors-to-challenge-tax-hike-in-court.html

Then read & join the fight by clicking on the following link:-
https://www.crowdjustice.co.uk/case/clause24/

Your pledge will only be deducted from your account if the target is reached.

If you wish to understand more about this new tax grab & how it will effect everyone, not just landlords, then I suggest you join the Property118 leading Landlord Forum (see link below) and then click on the Forum tab & see the various discussion threads relating to this.

http://www.property118.com/

Kindest Regards

money manager

9:09 AM, 26th December 2015
About 3 years ago

An excellent move; it looks as though GO will be getting some "cold turkey" in the New Year.

Mandy Thomson

10:54 AM, 26th December 2015
About 3 years ago

Well done, Mark!

I've pledged and shared on Twitter and FB.

Mark Alexander

11:08 AM, 26th December 2015
About 3 years ago

The founders of Property118 have pledged £1,000.

The fund raising has exceeded over 50% of the initial target already.
.

dom glynn

11:30 AM, 26th December 2015
About 3 years ago

Pledged!

Alex

11:52 AM, 26th December 2015
About 3 years ago

Great work Mark and the rest of the Campaign team!

Pledged and shared.

Merry Christmas and a Happy New Year!

michael fickling

11:57 AM, 26th December 2015
About 3 years ago

Just pledged Mark.....A couple of other thoughts..FIRSTLY..can we also get other "industry" groups interested..as if this change is allowed to continue it sets a new precedent.... any group of business people or entrepreneurs can be very abruptly (three or four years) taxed out of existence..with zero consultation or debate...therefore all business people ought to be interested in at least saying that an "infinite" tax like is just plain wrong.
Secondly.... looking at the background documents one of the supposed "justifications" is it only affects a relatively small group of people. When exactly did prejudice against a minority become a legitimisation factor in creating government policy!... Imagine the outcry if any other minority group was singled out for a highly punitive tax grab with the specific aim of driving them out of the market place and justified on the grounds that there arent too many of them !! ( claim of "advisors" to Gov. that only one in 5 landlords affected)... What strange times we live in and what a strange government we have.

michael fickling

12:04 PM, 26th December 2015
About 3 years ago

Reply to the comment left by "Angela Bryant" at "26/12/2015 - 07:33":

If we had to go to court ..for a matter entirely concerning our rental business..say unpaid rent etc we would normally claim that back on a tax return.??
Perhaps we should all claim our costs in fighting this too...that way the foolish government is really paying for the case against themselves ?? ...A kind of justice in itself perhaps??

Im not a tax advisor...anyone out there??....if it is claimable... might also encourage other landlords to contribute !

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