Omnia Strategy, the legal firm founded and chaired by former Prime Minister Tony Blair’s wife, Cherie Blair, has written a formal complaint to HMRC proposing a judicial review of Chancellor George Osborne’s restrictions of deductions of finance costs related to residential property.
The new tax changes, set to be implemented in the autumn of 2017 would limit the ability of landlords operating as sole traders to offset mortgage interest payments from their tax liabilities.
The decision to seek a legal challenge to the Chancellor’s tax changes comes as a formal petition set up by the Residential Landlord’s Association failed to reach the required number of 100,000 signatures to be considered for debate in Parliament.
The legal challenge to the Chancellor’s proposed tax measures was brought by Steve Bolton and Chris Cooper who raised £50,000 in crowd-funding from landlords’ associations to initiate a legal challenge to George Osborne’s tax changes.
Mr Bolton owns around 20 residential and commercial properties is also the founder and owner of Platinum Property Partners, a buy-to-let specialist with a portfolio worth a total of £200million. Mr Cooper is a part-time landlord who is using buy-to-let as part of his pension.
The letter to HMRC lists Miss Blair as one of two legal advisers for the claimants and bases the challenge on several purported breaches of the European Convention on Human Rights. The letter claims that the Chancellor’s measures infringe on one’s right to hold one’s property in a way without unfair taxation and may also go against European Union competition laws by favoring large institutions over small individual investors.
In it’s official response to the petition, the Government has claimed that the tax changes remove tax advantages enjoyed by property investors which are not available to those investing in other asset classes.
A move by a landlord’s organization, the Residential Landlord’s Association to overturn Chancellor George Osborne’s changes to landlord tax exemptions suffered a serious blow as its Parliament petition failed to attract sufficient support.
The petition, “Reverse the planned tax relief restriction on ‘individual landlords’” expired today without reaching the required number of 100,000 signatures necessary to be considered for debate in Parliament closing with only 60,894 signatures.
Begun six months ago, the motion sought to challenge Chancellor George Osborne’s reduction of Mortgage Interest Relief announced in his 2015 Summer Budget and Autumn Statement. However, enough support was obtained to warrant an official statement on the topic whereby the Government rejected claims that the proposed tax changes were unfair. In it’s response the Government added that the tax amendments were partly intended to reduce the tax advantages offered to property investors which were not shared by investors in other assets such as shares. The Government also claimed that only 18 percent of landlords are expected to be affected by the changes which are to be introduced gradually over four years beginning in 2017.
The petition’s sponsors, the Residential Landlord’s Association claimed that the tax changes were unfair and likely to result in higher rents for tenants as landlords seek to offset higher costs by increasing rents.
It is understood that some landlord groups are now seeking a judicial review of the Chancellor’s tax changes.
A BBC investigation has uncovered the a rapid rise in rental fraud in England and Wales. According to figures from Action Fraud, which collates national fraud statistics for the City of London Police, the number of rental fraud cases rose from 2,216 in 2014 to 3,193 in 2015.
The most common type of fraud consists of scam artists offering flats to rent which they do not actually own and demanding instant deposits. Very often the lure of a significantly below market rate rent is used to attract victims. Extreme examples often ask prospective tenants to pay for 6 months or 1 years’ rent in advance to secure the property prior to visiting it. Payment of large sums of money in advance targets foreign nationals who are frequently required to pay 6 month’s rent in advance by established letting agents in London and student towns such as Cambridge and Oxford.
Further, since the fraudsters leave no legitimate correspondence address, it is almost impossible for victims to pursue fraudsters in court. Other variations include instances where fraudsters do access the property and show around prospective tenants. The property already be rented or has been rented to multiple victims at the same time.
The scam which in the past gained notoriety from its early association with the listings website Gumtree, has now extended to other property lising and flat-sharing websites. EasyRoomMate for example blocks 5% of the 1,000 adverts placed on its UK site each week over fraud suspicions. Other common websites targeted by rental fraudsters include Gumtree, Air BnB.
The National Renters Alliance recommends several measures which tenants can take to help protect themselves from falling victim to this scam.
- Never pay money upfront before visiting a property. Always be suspicious if anybody refuses to let you visit the property before paying a deposit.
- Ask to see identification such as a driving license and/or passport from the prospective landlord or letting agent. If you are dealing with a company ask for a correspondence address.
- Prospective tenants can also check whether the landlord is a member of the National Landlords Association (NLA) using the NLA accreditation website www.landlords.org.uk
- If you are still a student, you can often uses your student union or accommodation office to check whether a landlord is on an approved housing list.
- If dealing with a letting agent check whether the agent is accredited by organization. Examples of such bodies include the Association of Residential Letting Agents (ARLA). the Royal Institution of Chartered Surveyors (RICS) or the National Approved Letting Scheme (NALS),
- Use commonsense. If the property looks too good to be true, too cheap for the location then it possibly is.
- Before paying a deposit ask the landlord or agent which government-backed deposit scheme is being used. Currently there are three: mydeposit, The Dispute Service (TDS), The Deposit Protection Service (TDPS).
- If the property is shared ask the current occupants how they found the property and how they pay their rent. If the landlord or agent collects only cash or regularly changes bank accounts this should warrant further vigilance.
- If possible use a credit card to pay for a deposit after the letting agreement has been signed. Be wary if you are asked to transfer money via money transfer agents such as Western Union or Money Gram. Only use these services to send money to people you already know and trust.
- Always check the legitimacy of an advert. This is especially true for a non-property website such as Gumtree, Avoid adverts with no photographs or ones with photographs used on multiple adverts.
Two property developers, Steve Bolton, Chairman of Platinum Property Partners, and Chris Cooper are have raised £50,000 through a Twitter crowdfunding campaign to challenge Chancellor George Osborne’s planned tax changes for landlords. Under the Chancellor’s proposals, landlords operating as sole traders would no longer to be able to claim Mortgage Interest Relief when calculating their taxes.
Bolton and Cooper began fundraising towards the end of a Parliamentary Petition launched by the Residential Landlords Association titled: “Reverse the planned tax relief restriction on ‘individual landlords’ which argued that the Chancellor’s plans were unfair to private landlords and may result in higher tenant rents.
The Residential Landlord’s Association petition attracted 60,894 signatures, well short of the required 100,000 necessary for the motion to be considered for debate in Parliament which may leave Court action the only option to challenge the proposed tax changes. The motion did however receive enough support to merit an official response from the Government reiterating the Treasury’s support for implementation of the Chancellor’s measures. In its response the Government claimed that the tax changes were fair and merely removed tax exemptions for property investors which are not enjoyed by those in other asset classes.
Speaking about the Chancellor’s plans, Bolton stated “It’s not clear why the government has chosen to just launch an attack on buy-to-let owner-operators with mortgages. It’s a tax from Alice in Wonderland – truly absurd and divorced from real life. Not only is this tax grab unfair, undemocratic and underhanded, but we believe that it could also be unlawful.”
It is believed that the pair have sought legal advice matter from Omnia Strategy, a legal firm founded and chaired by Cherie Blair.
A petition to regulate estate agency fees has been launched on the Parliamentary Petitions website. The motion started by Nigel Whitley requires 10,000 signatures to obtain a government response and 100,000 signatures to be considered for debate in Parliament.
Titled “Regulate agency housing fees” the petition calls for regulation of estate agency and private landlord fees and the full refund of tenants’ money if a prospective tenant fails the vetting criteria.
The deadline to achieve this goal is 16th July 2016 and follows in the wake of other campaigns to regulate the private letting sector. Mr Whitney claims that many private letting agencies and landlords perform costed background checks knowing in advance that they have no intention to leasing the property to an applicant, often charging disproportionate sums for the said reference checks. Mr Whitney claims that in many cases ten or more people are invited to apply for a single property with many being deliberately failed and charged by letting agents.
Letting agent fees are currently subject of much debate in parliament with some members of Parliament attempting to introduce private members bills to regulate the sector.
The Government has responded to a question asked in the House of Lords on the action it plans to take to prevent excessive letting agent fees being charged to private-sector tenants.
The Government’s representative in the Lords, Baroness Williams of Trafford, claims that it has acted to protect tenants against unfair and excessive letting agency fees by requiring agents to publish a full breakdown of all charges prominently in their offices and on their website. Furthermore, a fine of up to £5,000 may be imposed against agent who fail to comply.
According to the Government, transparency rather than regulation is the most important factor in enabling tenants to make informed decisions and compare prices. Baroness Williams claims that such measures are adequate to facilitate competition in the letting industry which would minimize prices and keep them fair.
Some however believe that such statements often ignore significant power disparities between letting agents and prospective tenants, especially in areas of high economic activity such as London. The National Renters Alliance for example believes that in some towns and cities where letting and management agencies predominate over private landlords, referencing requirements preclude the establishment of a free market system in letting agency fees.
Multiple reports exist of prospective tenants being deliberately failed reference checks by letting agents in order to charge extra reference fees. Some have also argued that the average price of a reference check significantly overstates the genuine cost of tenant vetting.
The topic of letting agent fees is gaining increasing prominence in Parliament as the housing crisis deepens. In 2014 the MP for Dunfermline and West Fife, Thomas Docherty, proposed a private member’s bill the “Letting Agent (Fees) Bill which would prohibit the charging to tenants by letting agents of annual tenancy renewal fees. However the motion failed to gain sufficient support.
The Government has officially responded to a Parliament petition launched by the Residential Landlord’s Association. The petition seeks to challenge Chancellor George Osborne’s plan to reduce landlords’ ability to offset mortgage interest payments from their tax liabilities which were announced in the 2015 Summer Budget and Autumn Statement.
The petition titled “Reverse the planned tax relief restriction on ‘individual’ landlords” claimed that the Chancellor’s proposals to limit Mortgage Interest Relief for landlords operating as sole traders would unfairly impact their ability to conduct their business. Moreover the lobbyists claim that such restrictions are not denied to sole traders in other industries.
The Government responded officially after the motion obtained more than ten thousand signatures stating that it is committed to a fair tax system so it is “restricting tax relief landlords can claim on property finance costs to the basic rate of income tax.” Furthermore, the government asserts that the ability to reduce tax liabilities by offsetting mortgage interest and other finance costs against their property income is not available to ordinary homebuyers and those investing in other assets such as shares.
“By restricting finance cost relief available to the basic rate of income tax (20%) all finance costs incurred by individual landlords will be treated the same by the tax system. This recognizes the benefits to the economy that investment in property can bring but ensures the landlords with the largest incomes will no longer benefit from higher rates of tax relief.”
The government also states that the measures will only be introduced gradually over four years starting in April 2017 which will give landlords sufficient time to adapt to the new rules.
According to petition guidelines, a motion will be considered for debate in Parliament if it achieves over one hundred thousand signatures.
A landlord’s group has begun a parliament petition to challenge Chancellor George Osbourne’s plans to reduce Mortgate Interest Relief. According to the Chancellor’s proposals,, announced in his 2015 Summer Budget and reiterated in the Autumn statement that year, landlords operating as sole traders would no longer be able to deduct mortgage interest payments to reduce their tax liabilities.
The petition launched by the Residential Landlord’s Association claims that the proposed tax changes will increase costs for landlords and tenants as landlords seek to offset higher tax liabilities by increasing rents. The Association also claims that a report from the Institute for Fiscal Studies released in response to the budget indicates that individual landlords are taxed more heavily than other homeowners even before the Chancellor’s proposed changes come into effect in 2017.
The petition titled: “Reverse the planned tax relief restriction on ‘individual’ landlords” also claims that landlords operating as sole traders incur costs i.e. mortgage interest in the course of operating their business. The Residential Landlord’s Association, RLA, claims that Osborne’s measures will unfairly target such landlords since they would be unable to offset costs in the same manner as sole traders operating in other sectors. The RLA claims that the tax changes will not affect large institutional landlords and companies which buy their properties in cash. Other campaigners however claim that buy-to-let is offered significant tax advantages compared with investors in other assets such as shares.
In order to warrant consideration for debate in Parliament, a formal government petition requires a hundred thousand signatures and ten thousand for the government to respond officially. The petition deadline is 27th January 2016.
The National Renters Alliance helps tenants and renters with common renting problems and bad landlords and letting agents. Services include helping renters recover money unfairly taken from deposits and help with property maintenance issues amongst other services.
Taking the stress out of renting.