Lawyers fire first broadside in legal challenge to buy to let tax change

The legal challenge to Chancellor George Osborne’s controversial buy to let tax change is underway with a letter sent to HMRC setting out the legal grounds on which the proposal is to be challenged in court.

The challengers - two landlords who have crowdfunded financial backing for their action - have confirmed media reports about the letter through their Facebook page.

The letter from Omnia Strategy, the landlords’ legal team led by Cherie Blair QC, is reported to make much of Osborne’s stated intention of changing buy to let taxes to establish a “level playing field” - a statement he made in his Budget last July.

Osborne proposes, in his Finance Act 2015, that some individual buy to let landlords would not be able to deduct full mortgage interest costs from their rental income before calculating a taxable profit.

However, Omnia tells the HMRC that it believes this discriminates against individual landlords by denying them the same rights as, for example, large scale corporate and institutional landlords which can "set their finance costs off against their income and be taxed only on their profit".

Omnia argues this discrimination breaches the European Convention on Human Rights.

The government has 14 days in which to respond from the receipt of the letter - which is thought to have been sent late last week - after which the matter moves to a judicial review court process. 

The landlords - Steve Bolton and Chris Cooper - say on Facebook: “The Finance Act 2015 includes Clause 24, which overturns a fundamental financial business principle, where INCOME less COSTS equals PROFIT. The current government sees fit to change this tried, tested and proven commercial formula. In simple terms, the government believe that it makes complete sense to tax property owners on that part of the rent that has been paid to the lender as mortgage interest, as if that money was still in the property owners’ bank account!”