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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NW Landlord

18:19 PM, 10th February 2016, About 8 years ago

Any news on government response ? Take it from it being so quiet that nothing is in yet ?

19:04 PM, 10th February 2016, About 8 years ago

So they've missed a deadline? Well there's a suprise (not!) When I was working my colleagues and I would sit up to the wee small hours so that a deadline was never missed knowing that vulnerable children and their familes were relying on us - only to be told again and again by our bosses that'd failed to meet theirs and so had shifted them!

Gareth Wilson

20:33 PM, 10th February 2016, About 8 years ago

Fingers crossed we'll know soon. James Cartlidge has today been enthusing in the Commons about a possible 500'000 properties being released on to the market as a result of these tax changes. No consideration from him of course for the more than 1.1 million tenants that such an achievement would evict.

Dr Rosalind Beck

21:14 PM, 10th February 2016, About 8 years ago

Reply to the comment left by "Gareth Wilson" at "10/02/2016 - 20:33":

Hi Gareth.
Isn't it the case that this is an MP who stands to make a shed-load of money from Build to Rent? No wonder he's pleased at the prospect of his cheaper and often better competitors being driven from the market - so that in the future people who want family homes with gardens in established communities near their families and friends will have to rent one and two-bed boxes at inflated prices on new developments.

The three words that seem to be screaming at me are: CONFLICT OF INTEREST.

Gareth Wilson

21:34 PM, 10th February 2016, About 8 years ago

Reply to the comment left by "Ros ." at "10/02/2016 - 21:14":

Yes it is a remarkable coincidence that the founder of Share to Buy has been such a passionate participant in these Parliamentary debates and advocate of measures designed to attack specifically individual landlords; to the point of revelling in the idea of them being forced to sell-up on a massive scale.

The threat of mass evictions is, I also imagine, an excellent means to stimulate the market for share to buy mortgages among tenants keen to keep the same roof over their heads. Share To Buy's offering of such mortgages is also therefore a remarkable coincidence.

All in all, he's a really great guy.

Steve Bolton

3:13 AM, 11th February 2016, About 8 years ago

Reply to the comment left by "Worried by Budget " at "09/02/2016 - 17:02":

We have no axe to grind and want to work with as many people and organisations as possible. A key statement from Chris and I from day one has been:

"Let's work together"

In practice this is proving more difficult than we had hoped but I can assure you that is not for want of trying and pushing from our side.

Chris and I have spent about 25% of our working time on the Judicial Review for the last two months (unpaid obviously) and are running up hefty financial costs that are now in the tens of thousands and are coming out of our own pockets.

Support from individual landlords and many letting agents has been immense - thank you!

Now we just need more of the larger organisations to get behind us in whatever way they can.

The JR application is coming on really well and as stated previously - HMRC missed the deadline to respond.

We will keep you all posted as things develop.

Signing off at 3.11am 🙂

Landlord Oh Landlord

5:12 AM, 11th February 2016, About 8 years ago

We are very disappointed, feel let down and betrayed of trust, aren't we not? hope they are not ignoring they have duty of response, not think they are above everyone else... at least, they are lucky as there won’t be a penalty for missing their deadline. lol


7:12 AM, 11th February 2016, About 8 years ago

Reply to the comment left by "Landlord Oh Landlord" at "11/02/2016 - 05:12":

There is a penalty for HMRC missing the deadline, our contempt.

Jon Pipllman

8:58 AM, 11th February 2016, About 8 years ago

A late response, or no response at all, to a properly served Pre-Action Protocol Letter should surely be noted by any Judge. It might not be serious in the grand scheme of the case, but Judges do seem to like proper procedures to be followed and the Pre-Action Protocol is pretty standard stuff.

Chris Byways

9:28 AM, 11th February 2016, About 8 years ago

I don't think they have to reply. But "if you do not say, when questioned, something you later rely on in court........"

They may well ask for extra time, which has to be granted or the Applicant is then seen as being difficult. However the time frame is very short to readjust the final application grounds to the court, causing disadvantage.

What is is likely to do is alter the final costs settlement, win or lose. But either way it is our money, to them it is just a job.

They do not have to give replies on time, or at all, at this stage, but will be directed to give a skeleton argument by the court - with these answers - after the first hearing. There will be several, or many.

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