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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Gareth Wilson

14:58 PM, 17th January 2016, About 8 years ago

Reply to the comment left by "Lisa S" at "17/01/2016 - 14:55":

Hi Lisa,

Do you have rental units in Southampton?

Lisa S

15:00 PM, 17th January 2016, About 8 years ago

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

Southampton Uni states:
Their Hall rooms start from £89pw (that would be the 'smallest' single with shared facilities...inc bills)
The 'average' private room (they say) is £73pw exc bills.

Lisa S

15:02 PM, 17th January 2016, About 8 years ago

Reply to the comment left by "Gareth Wilson" at "17/01/2016 - 14:58":

My son has 1, which I manage as he is working in London. However he is trying to sell it...guess why???
The wonderful Clause 24.

Gareth Wilson

15:10 PM, 17th January 2016, About 8 years ago

Reply to the comment left by "Lisa S" at "17/01/2016 - 15:02":

I have a little e-mail that might be of use to you, but I can't post it on the forum due to prying eyes.

Lisa S

15:14 PM, 17th January 2016, About 8 years ago

Reply to the comment left by "Gareth Wilson" at "17/01/2016 - 15:10":



Chris Byways

21:12 PM, 17th January 2016, About 8 years ago

Reply to the comment left by "Gareth Wilson" at "16/01/2016 - 23:42":

Sadly, just before 3.00pm today, the article was discovered by devotees of HPC, and (through sobbing and Apoplexy) they had the greatest difficulty in viewing it in its entirety.


When deleting the expletives, it was quite a chuckle, but basically casting doubts that rents would face upward pressure. Not to mention shortages in many types of rental homes.

money manager

7:20 AM, 18th January 2016, About 8 years ago

Reply to the comment left by "Jonathan Clarke" at "17/01/2016 - 09:50":

All good and valid and which I think reinforces my point that will dismiss any argument which is not based on solid evidence and reasoning is not true or at least is not the whole truth both at the point of policy formulation/announcement and any subsequent volte face; it's surviving the consequences.

money manager

7:28 AM, 18th January 2016, About 8 years ago

Reply to the comment left by "Lisa S" at "17/01/2016 - 14:55":

Don't know about Southampton but I have two foreign students (inc one married couple) on sponsorships for 2nd year degrees/MBAs and will soon have some Phds as well at £1000 pcm ex bills. That might seem high initially but they are a good size, top notch fcilities, right in the city centre and a prime development with a top notch 24 concierge. Rent increases seem inevitable and it will be the indigenous employee who feel the pinch more than government funded OS students.

Gareth Wilson

23:34 PM, 18th January 2016, About 8 years ago

The below important statement from Steve & Chris has just been posted on to the Clause 24 Facebook page:

"We are pleased to report that the judicial review of section 24 of the Finance (No. 2) Act 2015 has a “reasonable chance of success” according to our legal team, which includes Cherie Blair QC, Connor Quigley QC and Sarah Hannett.

The next step is for our lawyers, Omnia Strategy LLP, to send a letter outlining our case to the Government with a view to commencing judicial review proceedings. We will continue to update our funding partners and supporters on our progress in this matter. We expect the letter to be sent next week and will provide a further and more detailed update in the near future.

We will also be in further contact with key decisions makers within the various landlord, property, accountancy and other organisations to explore areas of common interest.

Your continued support and patience is both appreciated and welcomed.

If you have any questions or constructive thoughts, please leave a comment and we will answer you as quickly as we can. Thank you.

Steve Bolton & Chris Cooper"

Dr Rosalind Beck

23:57 PM, 18th January 2016, About 8 years ago

Reply to the comment left by "Gareth Wilson" at "18/01/2016 - 23:34":

Game on!

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