A London judge has dismissed a legal challenge to government plans to subject buy-to-let landlords to additional tax on their mortgage interest payments.
Mr Justice Dingermans at the High Court in London ruled that landlords Stephen Bolton and Christoper Cooper didn’t have an arguable case.
At a hearing today, lawyers for the pair argued that the legislation amounted to unlawful state aid, and was also in breach of the European Convention on Human Rights.
The changes are proposed in section 24 of the Finance (No.2) Act 2015. They will stop buy-to-let finance costs, of which the main example is mortgage interest, being a claimable business expense. This in effect means that most landlords with mortgages will have to pay tax of 20% or more on their revenue rather than their profit.
The change will only affect individuals who own rental properties in their own names, like the millions of buy-to-let landlords in the UK. Companies and wealthy cash investors are excluded. The tax burden faced by individual landlords might wipe out or even exceed their actual profit.
Bolton, founder of Platinum Property Partners, and Cooper, a fellow landlord and airline cabin crew member, have used a crowdfunding platform to pay for the claim. They have been funded by 737 individuals, according to court papers.
They were represented in today’s hearing by Cherie Booth Blair QC and Conor Quigley QC, who argued that, as the legislation only affects landlords who own properties in their own names, corporate landlords will be advantaged unfairly over individual landlords by a government measure.
“All landlords compete with all other landlords when they seek to rent out their properties”, Quigley said.
However, in his ruling, Dingemans J disagreed. He said that individuals and companies are not subject to the same tax rules, or even the same taxes.
All the claimants had managed to prove is “that there is a different legal and factual framework” in place for private individuals and corporates. Although he said he could “well understand the unhappiness of a private landlord looking over at a corporate landlord”.
Even so, “this is another example of corporates being dealt with differently from individuals. It raises political and economic questions, but not legal ones”.
He rejected an argument made by the claimants that he should allow the appeal to go to a full hearing on public interest grounds.
“It would be a miserable spectacle to watch a claim that is bound to fail, fail,” he said.
Steven Bolton and Christopher Cooper v Commissioners for Her Majesty’s Revenue & Customs and Her Majesty’s treasury
(Dingernamans J) QBD, 6 October 2016
Cherie Booth QC, Conor Quigley QC and Sarah Hannet for the claimants.
Timothy Brennan QC for the defendants.
