The landlords have obtained legal advice from Cherie Blair’s firm, Omnia Strategy, that they have grounds to mount a judicial review of the tax changes, claiming that it breaches human rights legislation and European law.
From 2017, tax relief for buy to let will gradually be cut to a flat rate of 20% compared with the 40% or 45% that some landlords currently enjoy.
“Not only is this tax grab unfair, undemocratic and underhanded, but we believe that it could also be unlawful,” said Bolton.
In the autumn statement the chancellor added an extra 3% stamp duty on buy-to-let purchases, starting in April 2016, saying that, “frankly, people buying a home to let should not be squeezing out families who can’t afford a home to buy.”
Landlords campaigning against the tax crackdown have met stiff opposition from groups acting on behalf of young adults and families forced into renting who feel they have been elbowed aside by tax-advantaged landlords.
Duncan Stott of Priced Out said: “The reduction in tax relief available on buy-to-let mortgage interest is welcome, as not only is this is an unfair tax perk that is unavailable to ordinary homeowners, but it also encourages landlords to pump more mortgage debt into the housing market.”
The Bank of England recently highlighted the risks to the UK’s financial stability from buy to let. Lending to landlords rose 10% in the first nine months of 2015, it said, compared with 0.4% in owner-occupied properties. It said it is reviewing the lending criteria adopted by firms and stands “ready to take action”. Landlords are currently able to buy houses using cheap interest-only mortgages, while first time buyers are required to buy using more expensive repayment loans.
But the Institute of Chartered Accountants in England and Wales was critical of the budget changes. Tax manager Anita Monteith said: “The 3% rise in stamp duty land tax for purchasing buy to let and second homes will affect individuals but not it would seem corporate investors. This compounds the complexity already announced in the July budget to cut income tax relief interest paid for financing such properties.”
The ICAEW also told Property 118: “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.”
Bolton, who runs Platinum Property Partners, a specialist buy-to-let business with £200m of homes, said: “The plight of first time buyers is one we understand. But it is wrong to put the blame on leveraged buy-to-let landlords with mortgages. Cash buyers are not affected. What the government is doing is victimising one group of individuals who have mortgages.
“Landlords are being demonised when the fundamental problem is that the government has not created enough new homes.”
A crowd-funding campaign has been launched to pay the initial £15,000 in legal fees, but Bolton said he expected the cash will be raised swiftly. Formal legal action will then follow in early 2016.
This article was written by Patrick Collinson, for theguardian.com on Sunday 27th December 2015 16.18 Europe/Londonguardian.co.uk © Guardian News and Media Limited 2010