Changes to tax laws that govern buy-to-let properties have landlords up in arms. The planned buy-to-let tax is deemed unfair because it targets private landlords who have buy-to-let properties in their own names and doesn’t target companies that invest in rental properties. Furthermore, tax will be on turnover rather than profit, which will eat into incomes. Landlords also won’t be able to claim buy-to-let costs as business expenses.
Cherie Booth Blair QC and QC Conor Quigley represent buy-to-let landlords in the fight against the changes. Unfortunately, they recently lost an attempt to win a judicial review because the high court’s Mr. Justice Dingemans believes the case is bound to fail.
The fight will continue, but private landlords should probably prepare themselves for the phasing in period, which starts in 2017.
Private landlords are an easy target – again
According to Ms. Booth Blair, government is unfairly penalising private buy-to- let property owners by singling them out while corporate investors keep enjoying various tax perks. Landlords, who include Ms. Booth Blair, said they would keep engaging with the government until the inherent unfairness of the changes is understood.
Axe the Tax coalition is another group fighting for equality in the buy-to-let market. The coalition represents over 150,000 private landlords who are deeply unhappy with the new tax laws. Coalition representatives said the new tax will increase rent rates to mitigate the inevitable losses the changes will bring. Furthermore, the representatives believe other potential consequences include landlords losing their properties or having to exit the market.
According to the National Landlords Association’s Chief Executive Richard Lambert, the court’s decision is ultimately disappointing. This is because it affects private landlords and their tenants, who face an increase in their rent.
The other side of the argument
In opposition, Timothy Brennan QC, who represents HM Revenue & Customs and the Treasury, believes Mr Justice Dingemans made the correct decision because the case does not concern public interest.
Betsy Dilner heads the campaign group Generation Rent, which represents tenants and thwarted first time buyers. The group believes the old tax system favoured people who bought homes to make a profit rather than those needing somewhere to live. The changes will give people who have been shut out of the housing market an opportunity to get on the property ladder.
The times they are a’challenging
Private landlords have faced sharp increases in costs of late, due to legislative changes that include the 3% stamp duty. Now percentage of mortgage tax relief available is down a whopping 15%. Between 2017 and 2020 tax relief will from 45% to 20%.
Cherie Booth Blair says that the legal process is just one aspect of her clients’ fight against the new tax law. The Axe the Tax coalition will continue lobbying for the abolishment of the unfair new form of taxation on buy-to-let property owners. They argue the new changes are ‘unlawful, unreasonable and discriminatory’.
The coalition representatives, Steve Bolton and Chris Cooper, issued a joint statement announcing their outrage at the court’s decision. They claim the court missed the opportunity to protect tenants, landlords and the housing market from the disastrous consequences of changing Section 24 of the Finance Act 2015. They cite Ireland as an example of what can go wrong. Ireland introduced a similar system which resulted in an average rental increase of 50% over 3 years. Clearly this does not favour tenants, and in a housing market that is as strapped as ours, surely we can’t afford to push more people out of their homes?