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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Chris Byways

12:24 PM, 26th January 2016, About 8 years ago

Reply to the comment left by "money manager" at "25/01/2016 - 23:46":

Me too. Another cheap unit to go:-

I have an 'inherited' tenant, now much more than two months in arrears.
He is in and out of work, last employer went bust, now off sick.
Has no money or assets, nor good at managing money, lives frugally apart from drink and baccy.
Looks after the flat reasonably, no complaints from him. He and I Would like benefit paid direct.

He had applied for UC. I have tried to contact them, they say A) will only speak to tenant, and B) if application made on last five weeks, just wait.

Issued a s8, expires this Sat 30/1/16. I do not intend waiting another 3 weeks before starting eviction proceedings.

Local council say: "Hi Chris
We are aware of this situation and it is very unfortunate and I am unable to do anything due to the current regulations with the Universal Credit.

If he does become homeless I would recommend that he contacts the homeless solutions based at Franklin House and he could speak to the DWP regarding his situation, but I am unsure what they would be able to do to help him."

Shelter say an interim payment can usually be made within 14 days.

By then eviction proceedings will have started, and once started will be completed - unless there is any chance of recovering current rent and some of past debt. The flat will be improved, rent increased nearly 50%, and no longer available for HB tenants. He will probably be regarded as intentionally homeless, and will have a poor Landlord Referencing entry.

Annie Landlord

15:39 PM, 26th January 2016, About 8 years ago

Reply to the comment left by "Chris Byways" at "17/01/2016 - 11:38":

The comment is very sensible, but who would set it up? I have just visited the hpc website for the first time. (I won't be going again) I'm now happy about two things, firstly that none of the posters are tenants of mine, and secondly that there are only half a dozen regular posters on there anyway!

Gareth Wilson

11:02 AM, 1st February 2016, About 8 years ago

Issued on behalf of CrowdJustice campaign ‘Judicial Review of Clause 24’


A legal campaign to fight punitive tax relief changes for buy-to-let landlords has progressed to the next stage. Two landlords, Steve Bolton and Chris Cooper, are set to challenge the Government in court on behalf of 737 campaign supporters and 250 Platinum Property Partners.

Legal opinion from law firm Omnia Strategy LLP, led by Cherie Blair MBE QC, has confirmed that the campaign has a ‘reasonable chance of success’.

Following a successful fundraising stage, where the target of £50,000 was raised in a matter of days via the Crowd Justice website, the legal team has now issued a Pre-Action Protocol Letter to HMRC. The letter, which has been issued on behalf of co-claimants Steve Bolton and Chris Cooper, calls for a Judicial Review of the Government’s policy change announced in the Summer Budget 2015 which restricts buy-to-let mortgage interest tax relief from April 2017. The Government must respond to the letter by Wednesday 10th February.

The new policy (Section 24 of the Finance Act 2015) will prevent landlords with mortgages from offsetting mortgage interest costs against rental profit before calculating tax, which overturns a fundamental business principle where income less costs equals profit. This will result in some landlords who finance their business with mortgages paying tax despite making no profit on their letting business.

The legal challenge seeks to overturn this ‘Alice in Wonderland’ tax – so-called because of its absurd nature and separation from real life. The challenge has the backing of both private landlords and key industry stakeholders.

The legal challenge is being made against the new policy on the basis that it breaches the European Convention on Human Rights, and it constitutes unlawful grant of State aid to corporate landlords and to the owners of commercially let holiday homes contrary to articles of the Treaty on the Functioning of the European Union.

Despite being introduced with the aim of creating a level playing field in the property market between homeowners and landlords, the policy does not do this. In the most part, homeowners do not generate taxable income from their homes, nor do they pay capital gains tax on the sale of their home. In addition, the Government has decided to exclude the most wealthy property landlords, who are able to make cash-only purchases, as well as institutions, corporations and overseas landlords, and those who own commercially let holiday homes, all of whom are unaffected by the change.

Furthermore, the tax discriminates against landlords with mortgages by making them the only type of business where the cost of funding the capital of their business is not tax allowable, a point made by the Institute of Chartered Accountants of England and Wales. As a result, some landlords will be liable to pay tax on an economic loss and could have effective tax rates of over 100%. There are also likely to be consequences for tenants, such as rent increases, evictions and reduced supply of rental homes.

Steve Bolton commented: “This tax grab is unfair, undemocratic and underhanded, and we believe it is unlawful on a number of points. In no other business are costs wholly incurred to fund the business liable for taxation. In addition there is no substantiation in the Government’s proposal that the changes will create a level playing field between homeowners and buy-to-let landlords. The change discriminates against the typically smaller landlord who may incur effective tax rates of over 100% while making an economic loss, and gives an unfair commercial advantage to many other categories of landlord unaffected by the change. We are therefore delighted that our legal challenge has progressed to the next stage and look forward to receiving the Government’s response.”

For further details of the campaign, please visit the Crowd Justice website: https://www.crowdjustice.co.uk/case/clause24/

Dr Monty Drawbridge

11:29 AM, 1st February 2016, About 8 years ago

It is just the start but it is nevertheless very exciting as well as interesting. I'm looking forward to seeing HMRC's response, due next week.

Well done again, all involved.


21:40 PM, 3rd February 2016, About 8 years ago

Reply to the comment left by "Dr Monty Drawbridge " at "01/02/2016 - 11:29":

We all seem to have forgotten the problems of universal credit , perhaps Osbourne has thrown in clause 24 to distract us !

dom glynn

10:25 AM, 7th February 2016, About 8 years ago

Please forgive me if I was misguided on this one, but I was under the impression that Steve and Chris were collaborating with RLA in this campaign.
I've just read an article in the RLA magazine which suggests that the complete contrary is the case.
In fact it appears to mock the sterling efforts of Chris and Steve in their crowd funding exercise.
The RLA have stated that they have a £600k 'war chest' to fund their own legal challenge to C24.
I suspect that if this campaign goes as far as we all hope, £600k may not even be sufficient funding.
I for one, will be more than happy to contribute to the next phase of the campaign.
Surely now if any, is the time for pooling resources?

Simon Griffith

12:22 PM, 9th February 2016, About 8 years ago

Reply to the comment left by "Worried by Budget " at "07/02/2016 - 10:25":

Indeed I share your concerns. I asked the NLA why they didn't include the Judicial Review letter/Cherie Blair in their weekly email out to all members. What landlord wouldn't be interested in that ? They replied they don't support it - I still don't quite get that but it is news and they could at least put it out there for landlords to make their own mind up. If only landlords could unite under one banner - property118.com - the new landlord's association ?

Steve Bolton

15:55 PM, 9th February 2016, About 8 years ago

In reply to the comments regarding the RLA, NLA and others, Chris and I are in contact with both of these organisatons and others.

Conversations have been positive and are progressing well. The situation is complex but in the near future we hope to be able to finalise the positions of various organisations and make public statements about how we are working together (or not as the case maybe).

Chris and I realise that what appears to be a slow and/or negative response is frustrating but progress is being made in the background and will be reported on as soon as possible.

Thanks for bearing with us

dom glynn

17:02 PM, 9th February 2016, About 8 years ago

Reply to the comment left by "Steve Bolton" at "09/02/2016 - 15:55":

That's great Steve. It just seems to make sense that if possible, we combine forces on this campaign rather than having several smaller, less effectual fronts.

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