Landlords have failed in their legal battle against a planned government tax increase on buy-to-let properties.
Landlords went to court seeking a judicial review, arguing that the new rules amounted to an unfair tax on tenants as they would drive up costs for buy-to-let investors who would ultimately pass these on in the form of higher rents.
However, in the High Court, Mr Justice Dingemans said: “It would be a miserable spectacle to watch a case that is bound to fail.”
Cheri Booth QC, representing the Landlords, was applauded from the public gallery when she announced that the government was unfairly penalising individual buy-to-let landlords by “singling them out” for unfavourable tax treatment, whilst others were allowed to keep their tax ‘perks’.
This is because the changes only affect those who own rental properties in their own names. Companies that own buy-to-let properties, wealthy cash investors and landlords of holiday lets are exempted from the new rules.
The claim of unfairness was, however, refuted by HM Revenue & Customs and the Treasury who argued, “There are cases which justify the courts looking at them in the public interest. This is not one of them.”
Campaigners have seven days to appeal the ruling. It is understood, however, that a further challenge by the Landlords is unlikely.
The planned tax changes, which come into effect from 2017, will stop buy-to-let costs, including mortgage interest payments, from being claimed as a business expense.
Steve Bolton and Chris Cooper, co-claimants on behalf of ‘Axe the Tenant Tax’ group who represent 150,000 landlords, argued in court that the tax changes will impact most landlords who would then have to pay tax on turnover, rather than profit leaving many with a cash shortfall or rental loss. ‘Axe the Tenant Tax’ claim the changes discriminate against individual landlords and will drive up rents substantially.
‘Axe’ went on to predict that many tenants were likely to lose their homes due to large numbers of landlords exiting the market. These same landlords would also experience pension plan disaster, whilst the large corporations and wealthiest in society continue to benefit from unfair tax policies.
Mr Bolton and Mr Cooper stated that they would now focus their efforts on lobbying government following the high court’s ruling by encouraging landlords to write to their tenants where they have increased rents or sold up explaining that it is this Conservative tax policy that has led to the course of action.
Richard Lambert, chief executive of the National Landlords Association, added: “This decision is ultimately disappointing not just for landlords, but for the tenants who will see their rents rise as a consequence of the changes to landlord taxation.”
“While we have never been convinced that there was a solid enough legal case to overturn George Osborne’s decision, we hoped the courts would be prepared at least to listen to the arguments.”
The opportunities for individual landlords to profitably invest in buy-to-let property have been significantly affected by recent legislative changes, with new purchases now subject to an extra 3% stamp duty. In addition, from December 2016, Landlords who knowingly rent to illegal immigrants risk imprisonment under new regulations introduced by the Home secretary, Amber Rudd.
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