Axe the tax has failed so far
I have been watching the attempt of landlords Steve Bolton and Chris Cooper to seek a Judicial Review of legislation reducing the mortgage interest tax relief for landlords
It saddens and outrages me to find out that the review has failed.
The landlords were represented by law firm Omnia Strategy LLP, led by Cherie Blair QC.
Bolton and Cooper said the outcome has completely missed the opportunity to protect tenants, landlords and the housing market from the disastrous consequences of Section 24.
I cannot understand why the government cannot see that it will be tenants who are hit hardest. Due to forecasted rent increases from landlords passing on the tax or landlords selling up and then less availability of rental stock. It seems everyone can see the clear and direct consequence of this ludicrous legislation except the powers that have passed this legislation.
I foresee us being very busy with removing tenants from their homes and processing unnecessary evictions as vast numbers of landlords will be forced to exit the market and sell up. The market is made up of thousands of private hard-working, responsible landlords and now their pension plans in ruins. It seems the tax is allowing for unfair competition as the large corporations and the wealthiest in society, who can buy property without the need for mortgage finance, are systematically excluded from this unfair tax policy.
It is good to read that neither gentlemen are giving up on their quest. Both said their goal is to abolish this tax or to remove the retrospective nature of it.
For those that would like to know the history of Steve Bolton and Chris Cooper legal argument.
The legal argument was based on the alleged discrimination against individual landlords contained in Section 24 of the Finance (No 2) Act 2015; the core of this section was the phased reduction of mortgage interest tax relief for landlords paying higher rates of income tax.
The allegation was that individual landlords were denied the same rights as, for example, large scale corporate and institutional landlords which can set their finance costs off against their income and be taxed only on their profit.
Cherie Blair described Section 24 as “manifestly unreasonable” with no evidence that landlords were effectively preventing first time buyers from purchasing homes – one of the reasons cited by former Chancellor George Osborne in his Budget in 2015 that introduced the mortgage interest tax relief change.
The campaign led by the landlords claimed individual buy to let investors would have to pay extra tax of 20 per cent or more of their mortgage interest payments. The tax they pay might be greater than their real profit, leaving them with a rental loss and a cash shortfall.
This tax would only have affected individuals who own rental properties in their own names, like the millions of small landlords in the UK. Companies owning buy to let property and wealthy cash investors were excluded from the tax.
Richard Lambert, chief executive of the National Landlords Association – which supported the action – said the decision was disappointing for landlords and tenants, who would now see their rents rise as a consequence of the changes to landlord taxation.
“While we have never been convinced that there was a solid enough legal case to overturn George Osborne’s decision, we hoped the Courts would be prepared at least to listen to the arguments. We congratulate Steve, Chris and the campaign team on their determination, perseverance, and their success in raising awareness and increasing the visibility and understanding of what will be a dramatic change to the ability of hard working people to provide homes for others” says Lambert.
“This issue has been the focus of the NLA’s lobbying for the past 15 months and, as the UK’s largest representative body for landlords, we are still committed to changing this damaging policy through political engagement and lobbying. We urge all landlords to join us in this fight.”
It is clear that despite the demand for rental properties, maintain any form of profit is increasingly difficult to achieve due to ever increasing costs, lost income due to rogue tenants and low inflation and income maintains the same level. Landlords have seen anything from 30-40% in additional costs and many are now running at a loss. This policy must be challenged and changed, private landlords need to join forces and lobby. It does seem that the government are targeting landlords as an easy route to collect tax. Why not make it an even playing field and have a tax system that also impacts on the large multi-national corporations and overseas property investors?