Our case

We need to raise £15,000 as quickly as possible (and then a further £35,000), to enable our experienced legal team to fight Clause 24 and take this matter as far as the Judicial Review process will allow. Your financial support would be greatly appreciated.

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!

To justify their point of view, the Government have referred to the term “level the playing field”, between owner-occupiers and owners of property who choose to provide professional, legal and compliant accommodation and services to tenants.

The following points clearly demonstrate that a “level playing field” does not exist now and we believe that Clause 24 is unlawful and should be challenged on a number of fronts:

• Owner-occupiers pay zero Capital Gains Tax when they sell their property, whereas owners of rental accommodation pay between 18% and 28% capital gains tax.

• Owner-occupiers have no regulations or costs associated with fire, gas and electrical safety and certification, licensing and energy performance certificates, whereas owners of rental accommodation have financial and/or legal obligations relating to more than 200 different regulations and laws. Failure to comply can result in imprisonment and substantial financial penalties.

• Many owner-occupiers can buy property with a deposit of just 5% to 10% and access lower interest rates, compared to 20% to 25% deposits and higher interest rates for buy-to-let borrowers.

• Owner occupiers can benefit from the ‘rent a room’ tax-free scheme, which is rising from £4,250 p.a. to £7,500 p.a from April 2016, compared to paying tax on rental profits of between 20% to 45%.

Compelling evidence points to the consequences of this absurd new tax having a devastating impact on the UK housing market; increasing rents for tenants and the housing market potentially being flooded with properties for sale. And that’s not to mention the loss of jobs and damaging impact that falling house prices can have on the economy!

The Personal Finance Editor at the Telegraph Media Group coined the term: “Alice in Wonderland buy to let tax sets a new benchmark in absurdity”. Sadly we are not living in “Wonderland” and this tax grab is real and happening. Unless together we can stop it!

And that’s where we need your help….

The clock is ticking and we are almost out of time!!

We need to act together and we need to do so now. There will never be another chance to challenge what we believe to be the unlawful nature of this Alice in Wonderland tax.

We urge you to pledge as much as you are willing to give. Without the necessary funding, we will not be able to make progress. Please help us now by pledging towards this very worthy cause and spreading the word #clause24.

Those involved with this campaign fully support the elimination of unethical, unprofessional and illegal practices and unscrupulous landlords in the private rented sector. We also welcome fair measures to cool the housing market, so that we avoid the historical ‘boom and bust’ scenario. However, Clause 24 is not the fair or intelligent means of achieving that goal.

The change to landlords' tax status in the Summer 2015 Budget

The so-called 'tax relief restriction' on 'private landlords' was announced in July 2015.

This Clause is aimed at disallowing the perfectly legitimate finance costs (including mortgage interest), of individuals who operate buy to let properties in their own name.

The Government wishes to continue to tax not just the rental ‘profits’, but will now not allow individual investors to offset the main cost of arriving at that taxable profit, namely the mortgage finance costs.

There was no prior consultation with relevant individuals or organisations prior to the budget announcement. Subsequent communications regarding grave concerns from many people since introduction of the Finance Act 2015 have had no impact. There was certainly no mention of this tax grab in the run up to the election and some media reports suggest that a huge number of conservative voters will feel betrayed once they start to feel the impact of Clause 24.

The impact of this change?

The impact of this change fundamentally alters the financial playing field upon which all businesses and commercial enterprises operate.

The result is that people are now liable to pay tax on a fictitious amount of profit, whilst certain others groups operating in exactly the same sector, providing exactly the same service, are not impacted by these changes!

Clause 24 will not, as the Government has stated, only affect “the wealthiest landlords”. In fact, it will not affect the wealthiest landlords at all! This is because they are the ones most able to invest in buy to let properties without the need for mortgage finance and are therefore not affected.

Institutions and corporations will still be able to offset 100% of their finance costs to arrive at 'profit.' No explanation has been given for this favourable treatment, even though they can provide exactly the same service and are therefore being given an unfair competitive advantage.

Nor will it affect overseas buyers who purchase buy to let property in the UK.

Clause 24 Judicial Review

We are bringing a Judicial Review because we want to stop a systematic, on-going and what we believe to be an unlawful attack by the current Government on individuals who are being discriminated against for simply for borrowing in their own names.

We also want to ensure a level playing field in the private rented sector, and will challenge the unfair advantage the Government is giving to institutional and corporate investors, overseas property buyers and cash-purchasing landlords, none of whom are affected by Clause 24.

Rather than the government and sections of society demonising buy-to-let landlords, it should be remembered that a huge number of individuals and industry sectors benefit including: tenants who can live in safe and affordable housing, lettings agents, mortgage lenders and brokers, estate agents, solicitors, builders and other tradespeople, insurance providers and brokers, accountants, window-cleaners, gardeners and many others.

Furthermore landlords and those that they employ and engage are substantially contributing to tax revenues as a result of PAYE, National Insurance, VAT, income and corporation tax, stamp duty and capital gains taxes.

Why we are bringing a judicial review?

1. We believe this change will actually result in a range of very undesirable consequences for a very wide and diverse range of stakeholders including tenants, tradespeople, home-owners, first-time buyers, as well as individual landlords.

2. These proposals do not come with the normal grand-fathering rights associated with the vast majority of tax law changes (ie. the changes will not just impact those taking on finance for new property purchases but they will apply to ALL historical and existing properties where there are finance costs).

3. There was no consultation prior to the Budget announcement and feedback regarding the Finance Act appears to have been largely ignored and certainly not acted upon thus far.

4. The intentional complexity of Clause 24 has resulted in many people not understanding the personal and negative implications that they will have on their financial circumstances.

5. The fact that the changes have been pushed out to 2017 and then gradually phased in has been sold by the politicians as a way to minimise their impact. We believe this is just an age-old trick of ‘kicking the can down the road’, which results in less resistance at the time of announcing the new measures.

6. There is a very time-limited opportunity to act and if we miss this chance, there will be no second bite at the cherry.

7. The Institute of Chartered Accountants in England and Wales (ICAEW) have made many pertinent criticisms in relation to Clause 24. We fully agree with these and urge you to look them up for further information.

8. Campaigns and comments initiated by the Residential Landlords Association, National Landlords Association, Property Tribes, Property118 and other organisations and individuals show that there is a level of anger surrounding the unfair and illogical nature of Clause 24 that is putting it on a par with the political time-bomb that reminds us of the old “poll-tax”. Online discussion boards alone have been read by more than 400,000 individuals in less than 5 months. For a tax that is being phased in from 2017 and being tapered over three years, the Government would be well advised to heed these early warning signals. Especially as the real financial pain people will feel ties in exactly with the 2020 election.

How much are we raising and what is it for?

We are initially raising £15,000, which will pay for the lawyers’ time in providing a detailed legal assessment and recommendations, their expenses (if any), VAT and costs associated with the processing of funds via the CrowdJustice platform.

The lawyers will advise fully on the merits of a judicial review case and our likelihood (or otherwise) of success.  This will take the form of a detailed analysis of the legal position and the production of full written Opinion, drawing upon our legal team’s public law expertise and experience.

In the words of our counsel:

“There are significant constraints on the ways one can challenge primary legislation, which makes judicial review quite difficult. In short, we would need to show that the legislative changes unlawfully breach human rights or European Union law.”

We believe that there is strong merit in pursing this course of action for a variety of reasons, and we hope you will pledge to support the campaign.

A further ‘stretch target’ of £35,000 has been added, which will be used to fund the next stage of the process. Our lawyers have already given us an indication regarding a number of possible lines of attack.

After this fund-raising round has been completed and we have received the written Opinion, our aim is to push ahead and take this matter as far as the Judicial Review process will allow. At that time individuals can choose if they wish to pledge again or not.

We will share the legal Opinion, along with the pros and cons of the options available, with everyone who pledges money to this campaign. Feedback is both encouraged and welcomed.

For the purposes of transparency we (Steve Bolton and Chris Cooper) are giving of our time freely and will continue to do so, along with many others who are supportive of the cause.

Special thanks go to Mark Alexander and the team at Property118, Vanessa Warwick and Nick Tadd at Property Tribes, the tens of thousands of individuals who have signed the “say no to George” online petition and the many other supportive voices in the media for their on-going efforts in campaigning and speaking against Clause 24.

About the claimant

Chris Cooper and Steve Bolton are hard-working buy-to-let landlords who invested in property as a prudent way of securing a modest pension (Chris) and to provide an alternative income to full-time employment (Steve). Both of them saw a significant fall in the value of their property portfolios during the global financial crisis in 2008/09. They can both attest to the fact that buy-to-let property investing is not the risk-free lazy-persons route to wealth that the landlord-critics make it out to be! Alongside running their property businesses, Chris works for an airline and Steve leads the team at Platinum Property Partners, who specialise in mentoring others to invest ethically and responsibly in property, to replace or supplement their income and provide future pension security. Along with more than 46,000 others (and rising), Steve and Chris have been petitioning and campaigning to get the Government to re-think the Alice in Wonderland tax grab that is Clause 24.

Fast facts

## Name of our case: Judicial Review of Clause 24 of the Finance Act 2015 (“Alice in Wonderland Tax Grab”), which is aimed at disallowing the perfectly legitimate finance costs (including mortgage interest), of individuals who operate buy to let properties in their own name but excludes the same for institutions, corporations, wealthy cash buyers and overseas landlords. ## The clause The Government not only wishes to continue to tax rental ‘profits’, but will now not allow individual investors to offset the main cost of arriving at that taxable profit, namely the mortgage finance costs. ## What’s at stake: EVERY single business in the UK is allowed to offset their total costs against their income before being taxed (on their profit). The Summer Budget changes this very fundamental and important business principle. However, it only does so in a way that just discriminates against individual buy to let business owner-operators, who have mortgages/finance costs. As a result of this change, many thousands of people will find themselves being taxed on loss-making buy-to-let properties, see massive increases in the percentage of tax payable and many will find that they will be pushed upwards into a higher tax bracket, even though they may well not be making a single penny of extra profit! We want to bring back a level playing field in the private rented sector to challenge the advantage the government is giving to institutional and corporate investors, overseas property buyers and cash-purchasing landlords, none of whom are affected by Clause 24. In the words of Philip Booth, a Professor of Finance, Public Policy and Ethics at St. Mary’s University: “To put it quite bluntly, this is an elementary undergraduate public finance error that should not be made in the Treasury.” ## What's the next step? Subject to our careful review of our lawyers’ legal opinion, we plan to bring a “judicial review” case, which is a type of court proceeding where a judge reviews the lawfulness of a decision or action taken by a public body (in this case the Conservative Government). Specifically we are considering challenging Clause 24 of the Finance Bill 2015, which we believe may unlawfully breach human rights and/or European Union law. ## What are the steps and likely timings for a judicial review action? Raising £15,000 of initial funding as soon as possible (and then the further £35,000 thereafter) - A “pre-action protocol letter” setting out our case to be sent to the Government in the first few weeks of January 2016; - An application for judicial review to be filed with the court in 2016; - The Government would then have 21 days to respond to the application by filing a defence; - If permission is granted by the court, a full day hearing (likely lasting one to three days) would then be scheduled by the court, after which a decision would be made. ## Our legal team A hand-picked team of internationally regarded lawyers led by Sarah Hannett of Matrix Chambers.