Two landlords have managed to raise £50,000 in just nine days using an innovative crowd-funding campaign, with a view to launching a judicial review against a tax change. This is ahead of George Osborne’s Finance Bill which will otherwise remove tax-relief on mortgage interest payments.
The tax measure came “out of the blue” following the Conservative victory in the May election and will hit hardest those landlords with highly geared financing arrangements.
There are many buy-to-let landlords who have built-up large portfolios of rented-out properties who rely heavily on the interest mortgage relief to make their businesses viable. Accountants have said that in some circumstances landlords may have tax liabilities in situations where their property portfolios are actually making as loss – a 100% plus tax rate.
High and higher rate taxpayers in particular will be hit; thought the measure will be introduced on a sliding scale and over a period of 4 to 5 years. It is likely that most basic rate taxpayers will not be affected as the interest relief is capped at the basic rate of tax – 20% at present.
If the law is passed many thousands of buy-to-let landlords will see their earnings from rentals hit and even some basic-rate taxpayers will be affected if the tax rules change is enough to push them into the higher-rate tax bracket.
Some pensioners, who saw buy-to-let as an ideal vehicle to give them long-term returns on their money, when alternatives give very little return, are particularly aggrieved. However, for those with little or no financing costs the measure will have little or no effect on them.
Landlords Chris Cooper and Steve Bolton are now looking to take on the might of Government in the High Court action planned over the next few weeks.
Mr Cooper is a part-time landlord who bought into buy-to-let as a part of his pension, and Mr Bolton owns around 20 residential and commercial properties. They have taken legal advice and intend to bring the action under the Human Rights Act legislation.
Mr Cooper and Mr Bolton, the founder and owner of Platinum Property Partners, a buy-to-let specialist with a portfolio worth a total of £200million, launched the campaign via crowd-funding website “Crowd Justice” on Boxing Day. They have since received more than 700 donors in just over one week.
If their review is launched, the Government would have 21 days to respond to the application before a court decides whether it is granted; if so a court hearing will be scheduled and a ruling made.
There is a lot at stake for both parties as it has been estimated that mortgage relief costs the Government, and by implication landlords, £6.3 billion a year.
The campaigners have said they welcome laws to root out rogue landlords and unethical practices, and they also accept that measures may be needed to “cool” the buy-to-let market, but they see this proposed tax change as far too severe and against log established taxation principles for business.
£50,000 raised to fight tax change – https://t.co/1OGgYgsOLp
— LandlordZONE (@LandlordZONE) January 6, 2016