Cherie Blair is set to challenge the government’s tax relief changes for buy-to-let landlords in court, claiming it is a breach of their human rights.
Omnia Strategy, the law firm led by the wife of former Labour leader Tony Blair, has sent a letter on behalf of landlords Steve Bolton and Chris Cooper calling for a judicial review. The law firm said that the campaign has a “reasonable chance of success”.
The government must respond to the letter by Wednesday 10th February.
Chancellor George Osborne announced plans to limit tax exemptions for landlords in the Summer Budget to the basic rate of tax, which is 20%.
Many buy-to-let investors are now considering leaving the sector as they fear letting out a property will become far less profitable when the reforms come into force in April 2017.
Some experts believe the changes could cause an increase in rents as landlords look to claw back the money lost or even lead to evictions.
The legal challenge is being made against the new policy on the basis that it breaches the European Convention on Human Rights.
Cooper and Bolton argue that the new policy 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.
In addition, they say the government has also decided to exclude the most wealthy property landlords as well as institutions, corporations and overseas landlords.
Bolton, who founded Platinum Property Partners, said: “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.”
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Interesting. Whilst I most certainly support the challenge, I guess it is true to say that private individuals don’t receive tax relief on their mortgages; although I can remember the days when we did.
I think BTL landlords are doing a great service taking the risk of buying property and refurbishing run down houses at their own expense and providing accommodation for families. Something governments and councils have failed to do. If governments and councils have done their job properly and provided sufficient housing then private landlords would have faded away naturally without the need for any legislation. The reasons why property prices have risen so sharply recently are due to – money printing(quantitative Easing), shortage of new housing, low interest rates, help to buy scheme and not due to BTL landlords who are in fact helping increase the housing stock. Then why are the institutions, corporations, and overseas BTL landlords not penalised who are also doing the same thing, but in a big way. Britain is the only country in the world where people have to pay tax on losses.
I agree with everything Oswald says.
The fundamental problem is a lack of houses being built throughout the UK.
Hitting the small landlord with large increases in Stamp Duty and removing mortgage interest as a deduction against rental income, reduces the amount of rental properties available for those who can’t afford to buy.
It increases homelessness and doesn’t help employment mobility..
Mr Osborne needs to go back and study housing economics. The private rental sector has had to pick up
the reduction in social housing, since the ‘right to buy’ policies from Mrs Thatcher’s era to now.
These policies are a short term austerity Tax grab, from those providing a service to the housing market.
The chancellor needs to tax large building companies who are land banking, rather than getting on and building new housing.
The chancellor on one hand frees up pensions where retirees can take more cash, yet takes away the option of investing it in buy to let.
The last minute stamp duty changes has artificially increased property prices for the first time buyer,
as it has caused a ‘stampede’ of investors trying to complete before the April 1st deadline.
The only answer is to increase the housing stock.
There is one fundamental difference between a BTL mortgage & a residential mortgage, when a BTL property is sold there is a 28% capital gain liability to pay whereas a residential property when sold is free from any taxation regardless of the value. I agree with one of the previous cpntributions that Osbourne sees BTL landlord’s as an easy target.
Eugene Dunbar