Two landlords incensed by Chancellor George Osborne’s buy-to-let changes are attempting to take him to court.
They hope a judicial review will overturn the controversial “Clause 24” of the 2015 Finance Bill, in which the Government introduced plans to prevent landlords offsetting mortgage interest costs against rental profits before calculating tax.
These tax changes, which will apply to existing investment properties as well as future purchases, will result in some buy-to-let investors paying tax even where they generate no profit or are loss-making.
This change will be phased in over a four-year period from April 2017.
Now Steve Bolton – chairman of Platinum Property Partners – and his fellow landlord Chris Cooper, are attempting to get the changes overturned.
Mr Bolton owns around 20 residential and commercial properties. He is also the founder and owner of Platinum Property Partners, a buy-to-let specialist with a portfolio worth a total of £200million.
Mr Cooper is a part-time landlord who is using buy-to-let as part of his pension.
Mr Bolton said: “It’s not clear why the government has chosen to just launch an attack on buy-to-let owner-operators with mortgages. It’s a tax from Alice in Wonderland – truly absurd and divorced from real life. Not only is this tax grab unfair, undemocratic and underhanded, but we believe that it could also be unlawful.”
The duo launched a campaign via crowdfunding website Crowd Justice on Boxing Day. They quickly reached their £50,000 target through some 741 supporters.
Other arguments central to their legal challenge are that:
- Owner-occupiers pay zero Capital Gains Tax when they sell their property, whereas owners of rental accommodation pay between 18 and 28 per cent CGT;
- Owner-occupiers have no regulations or costs associated with fire, gas and electrical safety and certification, licensing and energy performance certificates, whereas owners of rental accommodation have financial and/or legal obligations relating to more than 200 different regulations and laws. Failure to comply can result in imprisonment and substantial financial penalties;
- Many owner-occupiers can buy property with a deposit of just five to 10 per cent and access lower interest rates, compared to 20 to 25 per cent deposits and higher interest rates for buy to let borrowers;
- Owner occupiers can benefit from the ‘rent a room’ tax-free scheme, which is rising from £4,250 a year to £7,500 from April, compared to paying tax on rental profits of between 20 to 45 per cent.
Giving an update on Property 118.com, Mr Cooper said: “This week we are hoping to receive the legal Opinion. In other words, the formal written advice from our lawyers that gives us clarity on the specific lines of attack we can use for the Judicial Review and their opinion on likely chances of success.”