Judicial Review – Landlord Tax Grab

Judicial Review – Landlord Tax Grab

1:00 AM, 26th December 2015, About 8 years ago 280

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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


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Bill Morgan

1:16 AM, 9th January 2016, About 8 years ago


How long does a Judicial Review take?.If it takes years to reach the European courts, does this mean that the tax changes will still be implemented and then reversed many years down the line if the Judicial Review is successful ?

Gareth Wilson

23:42 PM, 16th January 2016, About 8 years ago

Check out this interview with Steve Bolton concerning the Clause 24 Judicial Review: https://www.youtube.com/watch?v=XuKgGnBaxaI

money manager

8:13 AM, 17th January 2016, About 8 years ago

Reply to the comment left by "Ian Hamilton" at "04/01/2016 - 18:59":

However, from past experience, the Treasury civil servants will dismiss any argument which is not based on solid evidence and reasoning, and before they take it seriously, they will pull apart the data on which it is based to make sure it stands up.

I jusst re read this post.

Surely if the above were really true those same civil servants would have realised the asymetric and discrimantory effects of C24 and it's totl ineffectiveness in adressing the policy stated policy intentions of addressing housing availability.

As C24 drives a coach and horses through any coherent tax policy is the NLA speaking to a less than impartial civil service, if so the diplomatic approach is a waste of time is it not?

Jonathan Clarke

9:50 AM, 17th January 2016, About 8 years ago

Reply to the comment left by "money manager" at "17/01/2016 - 08:13":

There is and should be an ever evolving multipronged approach. Legal / Political / Diplomatic / Direct action / behind the scenes action/ Media / affected parties which include us / tenants / politicians / agents / tradespeople / homeless organisations / charities etc etc.

Governments expect multi pronged attacks all the time. They know its impossible to please all the people all the time so they have teams set up to parry against attacks from all sides.

Its a game of chess. Their goal is political survival and to get re elected . Their strategy will be based around winning that and if Clause 24 becomes a thorn in their side and the cons outweigh the pros they will ditch it overnight or negotiate to save political face.

Our Queen ( in chess terms) is the strongest attack piece and at the moment it is rightly flying the Judicial Review flag . But all pieces support that attack.

Sometimes the mighty pawn will save the day and the political will can be turned on a sixpence through some dynamic intervention of the pawn.

I still believe that if the tenants as our army of pawns can be motivated to support the cause ( i dont know how though I must admit if Shelter and Crisis etc are not wiling to jump on board ) ........

. But if that were to happen then that will tip the balance I believe in our favour and the supporters against Clause 24 would double/treble overnight. The political will to carry this through would go into meltdown as the lobbying would become intense now from all sides and an intolerable pressure for the government to sustain its defence .

Clause 24 would become untenable for them to pursue

So you need ( sadly ) a tragic set of circumstances where a tenant in extreme vulnerable circumstances is being evicted and being made homeless as a direct result of this Clause 24. I am sure this is already happening every day as we speak.

They are the victims whose lives will be turned upside down. Clause 24 dents my profits but doesn't dent my whole existence. Its snowing outside at the moment but I am on the inside with my central heating on so I`m still fine. Its a big financial hit for me yes but all things are relative. My tenants will suffer far more from Clause 24

The media is by far the best placed organisation in my view to facilitate this and make it happen. They can get stuff on the front page and set the agenda for the politicians. Politicians then have to react.

A perceived greedy landlord will attract limited support and has a limited newspaper shelf life as a newsworthy item. On the other hand a young starving family with small children forced out of their home by the bailiffs directly because of Clause 24 ( and benefit caps and the LHA freeze and 30th percentile ) will have an impact 100 fold compared to my plight.. I have some of these tenants about to be going through the early stages of this process.

If the cameras follow this trend and line of thought and have a ghoulish `evictee of the day` spot on their news programmes then the bandwagon would grow. Interview the LL. Interview the tenant . Then interview the uncomfortable politicians . Ask them ``Why are you allowing this to happen``. ......Thousands of people will be evicted solely as a result of Clause 24. Put them on the front page. They will provide tear jerker response for the viewers. Me getting taxed an extra 50K wont. They will boo and jeer me but shout and clap and cheer the homeless tenants. The connection will be made slowly of course that we are in fact kinda on the same side.

I fully support the judicial review and that should carry on its excellent work.

The homeless situation though I believe will ultimately secure the victory for landlords and tenants alike . And its there for the taking.

P.S.And for cricket lovers - we need to get Stuart Broad on board.
He knows how to completely steamroller an opposition!

Sue Wall

10:42 AM, 17th January 2016, About 8 years ago

There are many students who would be affected If they could not have a choice of suitable accomodation - much of which is provided by the PRS - it would in turn affect students ' ability to attend UNI. Surely , neither the government , nor student unions or UNI 's want this to happen !!!! I think more publicity on this could be targeted at UNI 's / students because if many private landlords sell up , the only " choice " will be a shortage of larger institutional property. Regards. Sue

Lisa S

10:47 AM, 17th January 2016, About 8 years ago

Reply to the comment left by "Sue Wall" at "17/01/2016 - 10:42":

I wrote to all the University accommodation Departments and the Student Union right at the beginning of this,....not even one acknowledgement!

I'll resend them all now it is more well publicised,

Chris Byways

11:38 AM, 17th January 2016, About 8 years ago

Whilst supporting the legal challenge, I am wary the hurdle to show it is absurd in the Wenesbury sense, is very, very high.

I am increasingly of the view, there needs to be ONE main web page that can have all sides unite against it. Not a 118 forum, but a well written article, giving facts, links to articles, reference sources, updated, and the considered effects of ALL the measures, and the 200 odd statutes and regulations forcing PRS housing providers to sell-up, change to different areas or types of letting, and how the student, mobile professional, HB, the recently separated, those having sold but not bought, etc etc will all be badly effected through substantially diminished supply and significantly higher rent, with even less new houses COMPARED TO DEMAND, than ever.

Allow comments, but MODERATED to stop the abuse by those with an envious 'blood on the street/riots' axe to grind from HPC, but answer fairly without duplication, the alternative views.

Above all, make it abundantly clear why HB, job seekers, find it very difficult to find housing, and why all rents are going up.

Then follow with the actions tenants especially, can take to remedy.

Is this sensible?

Dr Rosalind Beck

14:29 PM, 17th January 2016, About 8 years ago

Reply to the comment left by "Sue Wall" at "17/01/2016 - 10:42":

Hi Sue and Lisa.
You make good points. Do either of you have any evidence I could use which shows how institutional student lets are systematically more expensive than that provided by private landlords? I am currently working on something and if you could find this information it could be important. Thanks in advance.

Sue Wall

14:49 PM, 17th January 2016, About 8 years ago

In my opinion the institutional lets are more expensive than same quality private lets and are not the choice for second and third year students. The big crisis will come in the SHORTAGE of institutional builds. If there are to be more institutional builds going to be built - where will they be built ?? On what land ?? This will still take away from first time buyers and will do nothing to help the housing crisis. Will try to get more statistics on rents. Regards. Sue

Lisa S

14:55 PM, 17th January 2016, About 8 years ago

Reply to the comment left by "Ros ." at "17/01/2016 - 14:29":

Hi Ros,

I've looked at Southampton Uni....it's an area I know...It's quite difficult to compare like for like...some Uni rooms are ensuite, they are all quite small, they have to share a kitchen and sometimes a bathroom. However:
A self contained 2 bed Uni (Halls) flat costs £1141 pcm inc bills and a bus pass.
Our 2 dbl bed Victorian flat costs £696 pcm exc bills
...that's £445 for bills!!

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