A group of wealthy landlords is to launch a legal challenge to George Osborne’s buy-to-let tax changes, which are due to come into force from April 2017.
They see the proposed changes, which could see some landlords paying income tax when their property investments actually make a loss, as grossly unfair and against long-established business taxation principles.
Acting on advice from Cherie Blair’s firm, (a substantial property investor herself) Omnia Strategy, the landlords’ group has decided to instigate a judicial review of the proposed tax changes, claiming that the move, which they think is politically motivated by anti-landlord sentiment, breaches human rights legislation and European law.
Serial investor Steve Bolton, who owns £10m worth of residential and commercial property, has linked up with other landlords to start the fight.
Bolton runs property investment advisory firm Platinum Property Partners, a specialist buy-to-let operation said to handle £200m of rentals. He has said:
“The plight of first time buyers is one we understand. But it is wrong to put the blame on leveraged buy-to-let landlords with mortgages. Cash buyers are not affected. What the government is doing is victimising one group of individuals who have mortgages.
“Landlords are being demonised when the fundamental problem is that the government has not created enough new homes.
“Not only is this tax grab unfair, undemocratic and underhanded, but we believe that it could also be unlawful,” thinks Bolton.
The legal action is to be launched using an innovative crowd-funding campaign to raise the money and to pay the initial £15,000 needed in legal fees. It is expected the cash will be raised quickly with the main legal action to follow early in 2016.
To rub salt into landlords’ wounds, following the Summer Budget withdrawal of interest relief, the autumn statement added an extra burden of a 3% stamp duty on buy-to-let and second home purchases, starting in April 2016. The Chancellor justified this move by saying: “frankly, people buying a home to let should not be squeezing out families who can’t afford a home to buy.”
The landlords’ argument is strongly opposed by campaigning groups who act on behalf of tenants, and in particular young adults and their families forced into renting when they feel they should be able to buy a house at an affordable price.
Duncan Stott of or one group calling itself “Priced Out” has said:
“The reduction in tax relief available on buy-to-let mortgage interest is welcome, as not only is this an unfair tax perk that is unavailable to ordinary homeowners, but it also encourages landlords to pump more mortgage debt into the housing market.”
The Bank of England has also expressed some concern about the risk to the UK’s financial and economic stability from the amount of buy-to-let mortgage debt owned by the lending banks. According to the Council of Mortgage Lender’s (CML) figures, buy-to-let mortgage lending increased by 10% in the first nine months of 2015. This compares to almost no increase in home owner mortgages. The Bank has said it is reviewing the lending criteria and is likely to take action.
Currently, buy to let lending is unregulated with cheaper interest-only mortgages, while home owners are required to meet stricter criteria and pay more for their loans.
But landlords and other professional groups argue that it is not the case that landlords have such an advantage: they argue landlords don’t get the relief from capital gain tax that homeowners do when they sell, and that property price increases are a world-wide experience, down to inflated asset prices due to ultra-low interest rates.
Even The Institute of Chartered Accountants in England and Wales, representing thousands of accountants most likely to gain through the complexity of the proposed tax changes, has been critical. A spokesperson ICAEW has said:
“The 3% rise in stamp duty land tax for purchasing buy-to-let and second homes will affect individuals but not it would seem corporate investors. This compounds the complexity already announced in the July budget to cut income tax relief interest paid for financing such properties.”
Landlords to Launch Tax Legal Challenge – https://t.co/t5iwLb4NCL
— LandlordZONE (@LandlordZONE) January 4, 2016