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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dom glynn

18:57 PM, 12th February 2016, About 8 years ago

Dr Rosalind Beck

19:05 PM, 12th February 2016, About 8 years ago

Reply to the comment left by "Worried by Budget " at "12/02/2016 - 18:57":

Thanks, WbB. That's a very clear illustration. I will pass it on.

Gareth Wilson

13:23 PM, 14th February 2016, About 8 years ago

Latest news on the legal action from the Judicial Review Facebook Page…

“We have now received a response from HMRC to our pre-action protocol letter. Our lawyers have advised us not to share the detail of this letter, but I can inform you that we will be filing the judicial review application next week as planned.

Everyone is working hard refining the relevant documents, gathering expert statements and background research.

Whilst we are getting access to some good case studies from people living outside of the U.K. but in EU countries, more would be better, so please keep them coming.

We will file the application by Wednesday and keep you posted.”

Gareth Wilson

8:00 AM, 16th February 2016, About 8 years ago

Dr Rosalind Beck

9:30 AM, 16th February 2016, About 8 years ago

Reply to the comment left by "Gareth Wilson" at "16/02/2016 - 08:00":

Hi Gareth.
I can't seem to get the link to work.

Annie Landlord

9:46 AM, 16th February 2016, About 8 years ago

Click on the link, click on Sections in the top right corner, then click on Mortgages and the btl info is top of the list

Dr Rosalind Beck

10:01 AM, 16th February 2016, About 8 years ago

Reply to the comment left by "Annie Landlord" at "16/02/2016 - 09:46":

Thanks, Annie. Got it now.

Chris Byways

11:44 AM, 16th February 2016, About 8 years ago

Reply to the comment left by "Ros ." at "16/02/2016 - 10:01":

Whilst looking for that article I came on this crass, aged report.

Competition: find the hidden fact! If any.

By Tony Hazell | Published Oct 08, 2015 | Mortgages |

A campaign to preserve tax benefits for buy-to-let landlords is well under way.

Until now, generous tax breaks including the 10 per cent wear and tear allowance – whether or not improvements are made to the property – and tax relief on mortgage interest have handed landlords the near-certainty of profits.

From April, they will have to prove they have spent money, and by 2020 interest tax relief will be reduced.

Pressure groups are pushing out data designed to convince politicians and opinion-formers that the changes could spell disaster for the sector.

They argue that some landlords will no longer make a profit from their rental incomes, especially if interest rates rise.

Guess what? If I borrowed money to invest in an Isa or pension, then I would not make a profit from the income either once I had paid the interest on the loan.

Why should landlords be immune from the rules governing businesses and investments – that is, that you are not guaranteed to make a profits.

In a nutshell, they have paid tiny amounts of interest and enjoyed lavish tax perks on what can be a highly-geared and lucrative investment thanks to rising property prices.

The facts surrounding buy-to-let do not suggest a market under pressure.

The Council of Mortgage Lenders says almost a fifth of home loans in July – the month the chancellor made his announcement – were to landlords.

Buy-to-let lending grew by 33 per cent year-on-year to stand at £1.6bn. Brokers report that there has been no let up in demand.

The Bank of England says the number of buy-to-let loans has increased by more than 40 per cent since the 2008 banking crisis, while owner-occupied lending increased by 2 per cent.

Such has been the rush to invest that the Bank has warned it could amplify a boom/bust cycle.

Lenders do not seem to fear the future. There are 1,100 buy-to-let mortgages – the highest number since 2008.

The cost of five-year loans to landlords has fallen to 4.08 per cent according to Moneyfacts. First-time buyers have to pay an average 4.9 per cent for a similar deal – and they do not get tax relief.

A recent analysis by the CML confirms just how heavily buy-to-let landlords are treading on the toes of first-time buyers. More than two-thirds of the property they buy are flats or terraced houses.

Other data suggest that half of new homes built between 1986 and 2012 are owned by landlords.

Half of new homes built between 1986 and 2012 are owned by landlords
There would be nothing wrong with this if they were on a level playing field, but this has not been the case.

The chancellor’s tax changes will remove some of the tilt, and no heed should be paid to any campaign to undermine them.


12:43 PM, 16th February 2016, About 8 years ago

Reply to the comment left by "Chris Byways" at "16/02/2016 - 11:44":

One should feel sorry for the author, Tony Hazell, for he does not have the intellect to grasp the true nature of the Osborne reforms.

Chris Byways

13:26 PM, 16th February 2016, About 8 years ago

He believes ALL rented property owners got the 10%

He probably thinks the mortgage relief HELPS LLs BUY the properties, rather than just on the financing interest, like some others.

He has the same financial acumen to the hogwart twirps.

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