Section 24, the Axe the Tenant Tax campaign and what we know ten years later

Almost ten years have passed since the Axe the Tenant Tax campaign sought permission to challenge Section 24 by way of judicial review.

The campaign attracted considerable support from landlords across the country and was represented by leading counsel. The argument was straightforward. Individual landlords were being denied relief for finance costs while companies continued to deduct those same costs in full. Many believed that was discriminatory and that it should therefore be struck down.

The courts disagreed.

Permission for judicial review was refused and Section 24 has remained part of the tax landscape ever since.

That could easily be the end of the story, but I don’t think it is.

Looking back

With the benefit of hindsight, I believe many landlords were asking the wrong question.

The campaign understandably concentrated on whether Section 24 itself was lawful. Parliament is generally entitled to decide how different taxpayers are taxed. Individuals and companies have always been subject to different tax rules and the courts are understandably reluctant to interfere with political decisions on taxation unless there is a very clear legal basis for doing so.

In that respect, the outcome was perhaps not surprising.

The fact that a policy appears unfair does not necessarily make it unlawful.

What Section 24 did achieve

Ironically, Section 24 may have achieved something its architects never intended.

Rather than forcing landlords to sell, many began looking at their businesses in a completely different way.

Some sold properties and reduced borrowing.

Some changed investment strategies.

Others concluded that incorporation provided a better long-term structure for their business.

Thousands of landlords also began treating their portfolios more commercially than ever before. Cashflow, return on equity, succession planning and business continuity became mainstream discussion points instead of afterthoughts.

That cultural change within the sector may prove to be one of Section 24’s most lasting legacies.

The legal landscape has also evolved

Since the judicial review was refused, the courts have continued to consider what constitutes a property business in a variety of tax contexts.

Those decisions have not changed the legality of Section 24. They have, however, provided greater clarity on how property businesses should be analysed and have highlighted that the concept of a “business” is far more nuanced than many people previously assumed.

That matters because tax legislation should operate consistently. Where Parliament uses the same language across different parts of the tax code, there is a legitimate expectation that similar activities will generally be analysed using similar legal principles, and those debates are continuing.

Would the challenge be different today?

Possibly.

Not because Section 24 has suddenly become unlawful, but because the questions landlords are asking have changed.

The conversation is no longer simply about whether landlords should be taxed differently from companies. It is increasingly about how genuine property businesses should be recognised, how tax legislation should be applied consistently, and whether HMRC’s published guidance always reflects the law as interpreted by the courts.

The real lesson

Looking back, I don’t think the Axe the Tenant Tax campaign was a waste of time; far from it because it united landlords, raised awareness of the issues and encouraged thousands of people to think more strategically about their businesses.

It also demonstrated that challenging government policy through the courts is difficult. Parliament writes tax law. Unless legislation breaches fundamental legal principles, judges will usually leave policy decisions to elected politicians. That remains true today, so the lesson for landlords is not to hope that Section 24 will disappear, it is to understand the legislation that exists, structure their affairs appropriately and make informed commercial decisions based on today’s tax system rather than yesterday’s.

That is ultimately where successful property businesses have focused their attention over the last decade, and I suspect they will continue to do so for many years to come.

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