Legal Battle Challenges BTL Tax Changes
When George Osborne announced controversial tax changes on buy-to-let properties in last year’s summer Budget, the move divided opinion amongst BTL landlords. Now two private landlords have l...
When George Osborne announced controversial tax changes on buy-to-let properties in last year’s summer Budget, the move divided opinion amongst BTL landlords. Now two private landlords have launched a legal challenge against the government – with a little help from a crowd funding campaign backed by over 700 individuals – and are being represented by none other than Cherie Blair’s law firm, Omnia Strategy.
Steve Bolton, private landlord and founder of Platinum Property Partners, and Chris Cooper, a property investor and part-time landlord, say the Government has unfairly targeted landlords like themselves and claim this breaches landlords’ human rights. They also argue that the Government has excluded the most wealthy property landlords (who are able to fund cash-only purchases), as well as overseas institutions and corporations and those who own holiday homes that are let commercially.
According to forecasts, the new tax relief changes will net the Treasury a whopping £1 billion a year by 2021. Omnia Strategy is challenging the controversial tax on behalf of Bolton and Cooper and if successful, this would be a major embarrassment for the Government. The new tax move is central to the Government’s plans to help increase home ownership and get the younger generation onto the property ladder, but many in the financial arena have questioned if this is the right way to go about achieving this goal.
The tax changes, set to take full effect in 2017, will prevent BTL landlords from deducting mortgage interest costs from their rental income before calculating the taxable profit, meaning many landlords may end up out of pocket. Landlords says the move will force them to increase rents and could lead many to sell up, meaning less available properties for renters who can’t afford to or don’t want to buy their own home.
Omnia argues the new rule breaches article one of the European Convention on Human Rights and that the policy discriminates against individual BTL investors by denying them the same rights as other business owners, including corporate landlords, who will still be able to set their costs off against income and be taxed on profit.
Critics of Blair have been quick to point out the irony of an ex-Labour leader’s wife leading the charge against the Conservative government and suggest she has her own interests at heart, particularly as the family own a number of BTL properties that have been bought as investments over the years. It remains to be seen if Bolton and Copper will be successful, but it will certainly be an interesting battle, and one that we’ll be following very closely.