High Court Ruling Not Good News For Landlords
By Martine Harris
Thu 27 Oct 2016
However the judge refused them leave to proceed and the co-claimants have now confirmed they are not going to appeal. The Government’s proposed changes will stop Mortgage Interest Payments being a claimable business expense, meaning that landlords with mortgages will effectively pay tax on their turnover rather than profit.
A recent RLA survey of landlords showed the changes could well lead to higher rents for tenants, see repair and maintenance standards slip and stem supply of PRS housing at just the time when demand is soaring. The RLA had supported the bid by Bolton and Cooper, sharing legal advice and access to research materials, however its legal advisers warned there was little chance of success.
David Smith, policy director for the Residential Landlords Association (RLA) said: “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.”
RLA vice-chairman Douglas Haig was in court for the hearing, which took less than two hours. He said: “Whilst it is now being judged as a legal tax that doesn’t make it a just or fair tax and the Government still doesn’t seem to fully understand the impact it will have on housing supply and economic activity. While landlords will be affected the real losers with be the tenants as living costs continue to increase.”
In a joint statement, Bolton and Cooper, who were represented in court by Cherie Booth, said they were “outraged” by the decision. They said: “It has completely missed the opportunity to protect tenants, landlords and the housing market from the disastrous consequences of Section 24. 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.”
The RLA has been campaigning against the changes since they were announced by former chancellor George Osborne and is starting to make an impact in Westminster, with a surge of support from Tory backbenchers. It will continue its lobbying work – asking that MIR changes be applied to new borrowing only, a move that will minimise the impact of these changes on established landlords and businesses. It is also asking members to write to, or ideally meet with their MPs to discuss just how these changes will affect their businesses, with hundreds already getting involved.