Landlords represented by Cherie Blair have failed in their legal battle against planned government tax relief changes for buy-to-let homes set to be introduced next year.
The campaign group Axe the Tenant Tax, led by private landlords, Chris Cooper and Steve Bolton, went to court seeking a judicial review because they believe that attempts to reclassify mortgage interest as anything other than a normal business expense would drive up costs for buy-to-let investors.
But at the high court yesterday, Mr Justice Dingemans said: “It would be a miserable spectacle to watch a case that is bound to fail.”
The current rules that permit landlords to offset all of their mortgage interest against tax will, from April 2017, be phased out, restricting the amount of mortgage interest landlords can offset against tax on their property investments.
By April 2020, once they have been withdrawn altogether, it is likely that higher-rate tax payers will only receive 50% of the relief that they currently get.
According to Treasury forecasts, the tax relief changes will net almost £1bn a year by 2021.
Cherie Blair and her husband, former Prime Minister Tony Blair, have built a property portfolio estimated to be worth in the region of £25m.
Speaking after the case yesterday, Mrs Blair said: “The Court’s decision that our clients’ legal challenge should not proceed is very disappointing. Steve and Chris, and many others, have dedicated a lot of time and energy into putting forward the best case possible. We know the case has been supported and followed with interest by a large number of individual landlords. Many of these landlords now face challenging times ahead.
“From the outset, the legal process was just one aspect of our clients’ fight against this unfair measure. Together with their impressive and growing coalition, they will continue to engage with the government, and the legal team wishes them every success.”
The Axe the Tenant Tax group campaigning against Section 24 of the Finance (No. 2) Act 2015 has vowed to continue to take their case to the government, despite the Administrative Court’s decision yesterday not to grant consent to proceed to a full judicial review hearing of the legislation.
In a joint statement, Bolton and Cooper commented: “We are outraged by the court’s decision. It has completely missed the opportunity to protect tenants, landlords and the housing market from the disastrous consequences of Section 24.
“From April 2017 the negative impact of this previously failed tax experiment from Ireland, where rents increased by 50% over a three year period, will be felt far and wide. Sadly it will be tenants who are hit hardest; they are set to see unprecedented rent increases over the coming months and years, which will be a very clear and direct consequence of this ludicrous legislation.
“For many, it will also mean the loss of their homes because vast numbers of landlords will be forced to exit the market. Hard-working, responsible landlords will have their pension plans in ruins, but the large corporations and the wealthiest in society, who can buy property without the need for mortgage finance, are systematically excluded from this unfair tax policy.
“Now that the legal route has run its course, we will be focussing 100% of our attention and resources on taking our case more forcefully, more powerfully and more directly, right to the heart of Government. Our goal is simple: to abolish this tax or to remove the retrospective nature of it.
“We will be launching a range of lobbying, media and grass-roots activism measures over the coming days and weeks. We will also be encouraging all of our landlords to write to their tenants if they have to increase their rents or sell up, clearly explaining that it is this Conservative tax policy that has forced them into this situation.”
The High Court’s decision to the refuse permission for a Judicial Review of Section 24 of the Finance Act, is disappointing not just for landlords, but for the tenants who will see their rents rise as a consequence of the changes to landlord taxation, according to Richard Lambert (left), chief executive officer at the National Landlords Association (NLA).
He said: “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.
“We congratulate Steve, Chris and the campaign team on their determination, perseverance, and their success in raising awareness and increasing the visibility and understanding of what will be a dramatic change to the ability of hard working people to provide homes for others.
“This issue has been the focus of the NLA’s lobbying for the past 15 months and, as the UK’s largest representative body for landlords, we are still committed to changing this damaging policy through political engagement and lobbying. We urge all landlords to join us in this fight.”
Also commenting on the decision by the High Court yesterday not to allow a judicial review of changes made to mortgage interest relief as it applies to landlords, David Smith, policy director for the Residential Landlords Association (RLA), added: “Having provided support for this case, the RLA is disappointed it will not progress to a full judicial review.
“The campaign to seek changes that will address the more difficult aspects of recent tax reforms to the private rented sector must now focus on a political path.
“The Autumn Statement next month provides an important opportunity for the Government to make changes that will support the development of the new homes to rent the country desperately needs.
“The RLA has already met with Treasury officials to discuss the issue and it will continue to lobby for changes that are good for tenants and landlords, whilst recognising the government’s limited financial room for manoeuvre.”