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Landlords secure £50k for legal challenge over B2L tax changes

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Two landlords seeking to fight Government plans to raise taxes on buy-to-let investments have raised more than £50,000 in less than 10 days.

Private landlords Chris Cooper and Steve Bolton launched a campaign via crowdfunding website Crowd Justice on 26 December, and have already secured the support of more than 740 donors.

The pair hope to secure a judicial review of specific clauses of the Finance Act 2015, through which the Government installed changes which prevent landlords from being able to offset mortgage interest costs against rental profits before tax is calculated.

The National Landlords Association has previously warned that the reforms “could add billions to rents”, while a parliamentary petition to scrap the changes launched in the summer has secured 47,497 signatures.

The pair are arguing for the review on the basis that the reforms would leave landlords alone in being unable to offset costs against their income before being taxed on their profits.

They say: “The Summer Budget changes this very fundamental and important business principle.

“However, it only does so in a way that just discriminates against individual buy to let business owner-operators, who have mortgages/finance costs.

“As a result of this change, many thousands of people will find themselves being taxed on loss-making buy-to-let properties, see massive increases in the percentage of tax payable and many will find that they will be pushed upwards into a higher tax bracket, even though they may well not be making a single penny of extra profit!”

The landlords hope to submit a “pre-action protocol letter” to argue their case to the government this month, with a formal application for judicial review later this year.

The Government would then have 21 days to respond to the application before a court decides whether it is granted.

If approved, a hearing would then be scheduled by the court, after which a ruling would be made.

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Comments

There are 5 comments at the moment, we would love to hear your opinion too.

  1. “The Summer Budget changes this very fundamental and important business principle.”

    Kind of, but anyone who runs company cars or does corporate entertaining will know that the government is quite happy to discourage certain things by not allowing them as expenses.

    “As a result of this change, many thousands of people will find themselves being taxed on loss-making buy-to-let properties, see massive increases in the percentage of tax payable and many will find that they will be pushed upwards into a higher tax bracket, even though they may well not be making a single penny of extra profit!”

    That’s the point. The government is keen for people to buy property as a home not an investment. They use tax levers all the time to encourage some things and discourage others. The writing has been on the wall for some time on BTL. As well as pushing out first time buyers it destabilises the economy because many BTL investments will fail if mortgage rates rise.

    • I share little sympathy with the BTL investors, however it does need to be applied fairly. From my understanding the legislation is poorly worded, as it stops people holding BTL personally from offsetting the interest, but allows companies whose sole, or majority business is BTL to offset the interest.

      So those small BTL investors get clobbered whilst the larger ones, who have put all their properties into a company get away with it.

      I am sure the legislation could be properly worded, much like the IHT legislation is worded to preclude these types of companies from qualifying from BPR.

  2. I agree with Soren Lorenson.

  3. Yet again Soren has it taped. BTL is under the cosh – accept it. If you listened to the radio this morning you may have heard the would be London Mayor Mr Sadiq Khan proposing rent control – and about time too.

    Most BTL investors rely on capital appreciation for a gain. If the bubble bursts we are back in 2008.

    If you want to invest do so properly – in the stock market. If you want to BTL do it with funds at your disposal – not with a mortgage. Just imagine if lenders had mortgages for people who wish to buy their shares or ISAs – they would be an outcry.

  4. Are you suggesting Harry that the “proper” investment arena of the stock market never borrows to speculate and having done so doesn’t offset the cost against their gains? Additionally I have no issue with the use of tax either as a relief or a cost to move investors to invest (or not) in certain assets. It does appear to me though a little unfair to move the goalposts so spectacularly after the game has started and leave as Duncan has said for one team to be playing to one set of rules and the other by a completely different set?

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