Section 24 appeal for Judicial Review by landlords rejected
By Molly Stokes
UK landlords have brought the government to court over the proposed capping of the amount of mortgage interest that they can offset against tax. The Judicial Review challenge provided by landlords Steve Bolton and Chris Cooper was rejected by a Judge on the 6th October 2016, meaning that the capping, which will be implemented next April, will be changed as announced in the summer Budget. The change will be introduced gradually over a period of 4 years.
It is predicted if interest payments are 75% or more of rental income, landlords staying in the market will have to choose one of two pathways: sell their properties, or raise the rents for their tenants.
The increase in rental income of their properties would be to avoid losing money after the change in taxation, which means that tenants may ultimately lose out, as their rents will increase to make up for the increased costs of renting and they may find themselves unable to carry on renting the same property. For those landlords unable to increase rental income, there is the option of selling ahead of next April, as many may be unable to keep letting, due to the increased taxation. Many landlords and tenants will be affected by this ruling, as those with the means are able to buy properties without finance, further widening the gap between the wealthiest and the poorest in this country.
A spokesperson for the Residential Landlord Association has stated that they are is ‘disappointed’ with the outcome of the court case, and were keen for the case to progress to a full Judicial Review. Both the RLA and the challengers, Bolton and Cooper, implied that this is not the end of the issue, both wanting to discuss the act further with Treasury officials.
Timothy Brennan QC, who represented HM Revenue & Customs and the Treasury stated that the claim made by Bolton and Cooper was invalid: “There are cases which justify the courts looking at them in the public interest. This is not one of them.”
In his Summer Budget 2015 speech, George Osbourne claimed that the change would be to create ‘a more level playing-field’ between those buying-to-let and those buying a home to live in; “So we will act – but we will act in a proportionate and gradual way, because I know that many hardworking people who’ve saved and invested in property depend on the rental income they get.” The Bank of England had warned that the current taxation scheme posed a risk to the nation’s financial stability.
‘Landlords lose legal fight to get Osbourne’s tax changes overturned’ from Property Industry Eye, October 7 2016, by Rosalind Renshaw