1:00 AM, 26th December 2015, About 9 years ago 280
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Private Buy-to-Let housing providers have chosen Boxing Day 2015 to begin their fight back at Chancellor George Osborne and his discriminatory tax regime, announced in the Summer Budget, which only targets private landlords with mortgages via the Judicial Review process.
New tax rules will treat mortgage interest as though it is earned income and push many rental property owners into higher tax brackets. Knock on effects can also include increased CSA payments and removal of other vital benefits but Osborne’s tax measures will not affect the wealthiest landlords (those with no mortgages), or indeed limited liability companies which borrow money to fund buy-to-let property investment portfolios.
Social Media has been buzzing in recent weeks calling for legal action to be considered.
The first step to instigating a Judicial Review is to obtain a detailed Legal Opinion from specialist legal counsel. Omnia Strategy LLP, established in 2011 by Cherie Blair CBE, QC, has been appointed.
The organisers of the campaign have launched a fund-raising appeal via the Crowd Justice website. Thousands of landlords are expected to donate funds.
Letting Agents and Mortgage Brokers are also being encouraged to contribute to the fund raising campaign. This is because their businesses are likely to be hit too if landlords stop investing or choose to sell up.
A member of ICAEW commented;
“It is a long established principle of taxation that expenses incurred wholly and exclusively for the purposes of the business are deductible when calculating the taxable profits. Clause 24 of the Summer 2015 Finance Bill contravenes that principle and will result in proprietors of property businesses being liable to tax on a fictitious profit – even if the proprietors really make a loss.
The tax change does not just affect new borrowings. Landlords with existing borrowings will be affected. Portfolio landlords will be particularly badly hit.
As a consequence of the tax change, major changes in the private sector will take place. Some landlords will pass on their increased tax by increasing rents. Others will be forced to sell, as they will not be in a position to pay the extra tax demanded by HMRC. Homelessness will increase as some tenants will not be able to afford higher rents and many will be evicted by landlords forced to sell”.
Mark Alexander, founder of the Property118 Landlords Forum said “it is important for the whole country that funding is raised to win this legal battle. Millions of Britons simply do not qualify for mortgages to be able to purchase a home of their own. The number of people seeking to rent privately has been increasing in line with the growth of the population for decades. It is all very well the government having an ambition for everybody to be a homeowner but they must be made to realise that isn’t realistic. The UK has an ever growing reliance on the Private Rented Sector. Investment and building needs to be encouraged, not taxed into oblivion”
In a letter to the Chancellor, Conservative Lord Flight said “A lot of Buy to Let investment has been an alternative to saving for old age via pension schemes. Up until World War II investing in rented property was the main method of providing for an income in old age. Given the poor performance of the Stock Market over the last 20 years, it is hardly surprising that many people have opted for Buy to Let investment as an alternative source of retirement provisioning. But Buy to Let does not enjoy any of the major tax advantages of pension saving, i.e. tax credit on the amount invested and accumulation of income and capital gains tax free within the pension scheme. The only Buy to Let “tax advantage” has been the ability of the interest cost to be offset against an individual’s income to determine their tax rates/bill – the very thing which you have attacked.”
When Lord Flight referred to offsetting the interest cost against an individual’s income he of course meant rental income only, not total income. Buy-to-Let interest is not deducted from any other income that a landlord might have – unlike the way MIRAS used to work.
Nor can Buy-to-Let losses be set off against any other income. A BTL property has to pay its own way. If it gives rise to a loss, the owner has to make good the loss out of other taxed income. Landlords do not receive any tax “breaks”.
BTL has increased housing stock by 2.5 million between 1996 and 2013.
BTL was only responsible for one-twentieth of the 150% price increase between 1996 and 2007, which is insignificant. Prices would have gone up even more if BTL had not financed the 2.5 million increase in supply – and so would homelessness.
Deducting finance costs from rental income is not a tax relief it is normal accounting practice everywhere, and for every business. That is why Lord Flight put “tax advantage” in inverted commas.
Disallowing finance costs for existing rental businesses is iniquitous and will be damaging for the economy. Rents will rise. Tenants who cannot afford the rises will be made homeless, to be put in temporary accommodation in whichever part of the country it can be found, at greater cost.
For these reasons, it is vital for private landlords, tenants and the entire rental sector that this funding campaign is successful.
The window of opportunity to submit an application for Judicial Review closes on 17th February 2016.
The Crowdfunding website page for making donations to the legal action fund can be found via a Google search for “Crowd Justice Judicial Review of Clause 24” or CLICK HERE.
Michael Fickling
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Sign Up10:53 AM, 11th February 2016, About 9 years ago
Reference the presentation of our case...TWO THOUGHTS>>.Dont know if the barristers have already got it..but the history of the Irish debacle in very similar circumstances to ours now.. and what happened there..... start to finish might well be impactive in "proving" our statements as to what some of the effects of the clause will be here in the UK..to a judge.. I know the barristers would certainly appreciate a briefing document around it...maybe already done or in hand of course..??
SECONDLY but perhaps even more importantly..
Also some web sites have area maps of england wales and shaded with the price growth of houses..shown...or lack of it.. Now the thing is even a glance at these "maps" put the sword to the myth of a uk wide problem with "soaring" house prices to a very strong degree..very strong...and perhaps for some to a surprising extent. Also and in particular the so called south east....".situation"..in reality is not even that...its actually a relatively small area of even that area... ( geographically )...This is very important as a draconian tax shift can perhaps only be justified ( from what ive read ) by a somewhat desperate or very serious real world problem/ situation...here it is founded upon alleged "soaring" prices. The maps are much more impactive in destroying that myth across england and wales... and perhaps illustrating very easily that if there is a problem at all..its a london one.... and requires....... IF anything.... a london soultion. I have a background in evidence presentation and a picture really does have a great impact ..even upon a judge...Surely if there is no national problem..and there really isnt..as the maps clearly and impactively show...then slapping the whole of england and wales with a national measure destroying a whole section of a market is fundamentally flawed from the get go....and the governments case fails as its base assumption is shown to be completely incorrect..
Dr Rosalind Beck
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Sign Up12:12 PM, 11th February 2016, About 9 years ago
I like your thinking, Michael. The lawyers do have the Irish information, but not information on your second point. Do you have a reference or link to these graphs? This could be very useful as you make a very good point.
Michael Fickling
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Sign Up12:31 PM, 11th February 2016, About 9 years ago
Yep Ros i will have a look and get the details for you. I have mentioned the national situation a few times on here usually referring to the three main indexes ( charts thereof ). On a long term trend they are also helpful in dispelling the myth.. but when you see the map with areas shaded it is actually easier to be impressed by the real situation..which is far from "soaring house prices" and there are in fact several huge areas of depressed "growth".Ive said it many times on this site and elsewhere.....england and wales do not have soaring house prices and in fact with London removed the opposite is the case. Unfortunately the great mass of the public have fallen for this myth... I even see landlords on this site apparently accepting it as fact when a proper look at the whole gives a very different picture. Gotta dash i will dig the ref up tonight and many thanks for all your efforts..
Incidentally there are several reasons why house price growth figures are massively flawed anyway in terms of price inflation...and i do mean massively but theres not space/time her to get into that. If you are interested it might be better to correspond elsewhere on that one but they really are very flawed..upwards for "counting" reasons.
Dr Rosalind Beck
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Sign Up12:59 PM, 11th February 2016, About 9 years ago
Reply to the comment left by "michael fickling" at "11/02/2016 - 12:31":
Thanks, Michael.
if you can give me as many arguments and references that you have, I can turn it all into an article which will be a useful resource, in addition to passing it on to the lawyers.
Michael Fickling
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Sign Up22:41 PM, 11th February 2016, About 9 years ago
For attention of Ros ref your request....and others.>>>> Reference my repeated comments about us as a nation actually NOT having soaring house prices and therefore the clause being totally unjustified anyway. in its "founding rationale"..so to speak ...One of the most impactive representations and maps is actually the Govmnts own..>>>.The Land registry web site. If you go to it and bring up the so called "heat Map"....of england and wales...now look at the bottom left and there is a five year button...click on that....then go to the sliding cursor and push it across to the extreme right to get a decent color contrast...hey presto you will see a tiny dot of darker color...London..and only london..not even the south east as a whole..has anything seriously beyond the national average of 2.9% ( the very long term average for eng. and wales )...Remember that the little bar chart at bottom right..showing figs has also to be divided by the number of years. It is a tiny, tiny area of the whole..London...itself only..... that can truly be described maybe as soaring..the whole of the rest is hovering around the long term average (2.9% )..Furthermore the helpfull folks at The Land registry have built a calculator..try this..set the base year as 2007.....then in the other box go to the present,,,it will give you the rise or fall...and there are plenty of falls I can assure you.....still...!! from the 2007 level. The telegraph newspaper web...also has an article to that specific effect..ie much of the nation still below 2007 level. The oft quoted national problem of "soaring house prices" is a myth.We should relentlessly say so and we ceratinly shouldnt acknowledge it as a fact becuse it simply isnt.Hope this helps.
Chris Byways
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Sign Up23:53 PM, 11th February 2016, About 9 years ago
Reply to the comment left by "Ros ." at "11/02/2016 - 12:12":
Those very nice people here
http://www.housepricecrash.co.uk/forum/index.php?/topic/204529-new-build-losers/page-1
have shown that, in some areas (everywhere bar London and it dormitories) have had some big price reductions. (Obviously no very nice BTL people around to push the prices up outside London)
Dunnow if that's any use to illustrate - we don't all have the luxury of big CGT liabilities........
Appalled Landlord
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Sign Up15:37 PM, 12th February 2016, About 9 years ago
Reply to the comment left by "michael fickling" at "11/02/2016 - 22:41":
Hi Michael
I’ve had a look at the heat map and the calculator, both of which are on this page:
http://houseprices.landregistry.gov.uk/thematic-map
It tells me that properties in my area are 5% below the prices of 2007.
Kathy Evans
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Sign Up15:42 PM, 12th February 2016, About 9 years ago
Reply to the comment left by "michael fickling" at "11/02/2016 - 22:41":
Instructions on how to find that page??? I can find a chart of house price index over however many years, but not what you describe.
Kathy Evans
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Sign Up15:49 PM, 12th February 2016, About 9 years ago
Reply to the comment left by "Appalled Landlord" at "12/02/2016 - 15:37":
My area is between -10% and -5%, which I knew by looking at prices.
This is also quite useful - change the area to your own to see a line chart:
http://landregistry.data.gov.uk/app/hpi/view?from_m=1&from_y=2007&loc_0=England+and+Wales&loc_uri_0=http%3A%2F%2Flandregistry.data.gov.uk%2Fid%2Fregion%2Fengland-and-wales&m_ap=1&m_chy=1&m_hpi=1&source=preview_form&to_m=1&to_y=2016
Dr Rosalind Beck
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Sign Up16:21 PM, 12th February 2016, About 9 years ago
Reply to the comment left by "michael fickling" at "11/02/2016 - 22:41":
Thanks, Michael. I am passing this to the lawyers. So well done for doing your bit here. If every landlord did something towards this campaign we would be laughing.