Judicial Review – Landlord Tax Grab

Judicial Review – Landlord Tax Grab

1:00 AM, 26th December 2015, About 7 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

JUDICIAL_REVIEW



Comments

Dr Rosalind Beck

10:20 AM, 30th December 2015, About 7 years ago

Reply to the comment left by "D D" at "30/12/2015 - 10:06":

I've just told Chris about it. Thanks for letting us know.

Neil Patterson View Profile

10:26 AM, 30th December 2015, About 7 years ago

Don't worry I used the company Debit Card and all was fine 🙂

Chris Cooper

10:34 AM, 30th December 2015, About 7 years ago

Reply to the comment left by "D D" at "30/12/2015 - 10:06":

Hi DD, thank you for letting me know. I have contacted the Crowd Justice team. Regards, Chris.

Alex Piggott

10:42 AM, 30th December 2015, About 7 years ago

I am so glad that this action has been organised. The vast majority of landlords I have spoken to had never heard of Claus24 and were shocked when I have explained it to them. Most still bury their heads in the sand.

I inherited a heavily mortgaged buy to let portfolio from my parents that both died suddenly from cancer, this year, not only have I had to deal with their deaths but I have also been faced with taking on a business overnight. Within weeks the government dropped this bombshell which has devastated any plans I had of being able to keep and build on a profitable business. The new tax will put me into the higher tax bracket and so means I will have to sell up and lose the majority of any inheritance I would have got. My father worked so hard to build what he had to provide for his family and his own pension.

I am grateful for any action that is taken against this short sighted policy. I have pledged funds towards the fight and will be following closely

Alex

MoodyMolls

11:17 AM, 30th December 2015, About 7 years ago

Hi Alex

I know how difficult that is my brother died in 2009 suddenly and we have been trying to sort out his portfolio which was in negative equity.

We hope to have sold everything by end of 2016.
Solictor fees unbelievable and some mortgage companies insist on only dealing with them.

Simon Griffith

13:24 PM, 30th December 2015, About 7 years ago

Thanks to everyone on property118.com for providing such an interesting forum and in particular all the threads dealing with clause 24. Special thanks to those behind the judicial review. we'll be pledging this pm.I've been a member of the NLA for ages but felt they weren't doing all they should be on this matter.thankfully someone on their forum posted about property118 and I've been watching from the side ever since. I wrote to the NLA this morning asking whether they will be joining forces. I'll post their reply. I note RLA are on board already - what will they be doing ? I'll be doing all my emails to agents/landlord pals later too and others shortly. Big push needed as only 46000 signatures on petition and that is free !

Chris Cooper

15:35 PM, 30th December 2015, About 7 years ago

Crowd Justice Payment Issues

I have received a response from the Crowd Justice team. Relevant details are:

The issue of certain cards not allowing the donation relates to the policy of the card companies. While we are working to improve this from our end, at this point in time, donors will need to contact their card company about allowing the payment, if there is an issue.
Initially when donors make a pledge, the action is only a pledge. Details are kept at the pledge stage until the card is actually debited. Only the pledged amount will be debited.

Regards, Chris.

Chris Byways

17:14 PM, 30th December 2015, About 7 years ago

Ros was requesting ideas for the legal team.

It might be arguable that it is wrong, Wednesbury unreasonably so, to tax into oblivion LLs who followed Gov recomendations

Manchester City Council Report 3.7 states:-
"The Gov is keen to encourage the PRS to provide more and more of the housing need"
http://www.manchester.gov.uk/download/meetings/id/10941/8_private_sector_rented_housing

Dr Rosalind Beck

17:55 PM, 30th December 2015, About 7 years ago

£40,000 in the bag!

Also, I forgot to say, I noticed the Daily Mail today in their financial news in brief section (or whatever it's called) mentioned the action against the Government and the Crowd Justice page.

Gareth Wilson

18:48 PM, 30th December 2015, About 7 years ago

Ask yourself everyone, is there anybody I'm yet to tell about the legal fund? Any individual? Any organisation? If we're sufficiently relentless we can have the 50k target safely in the bag by the time the Nation gets back to work on Monday. And what a statement that would be!

https://www.crowdjustice.co.uk/case/clause24/

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