Steve Bolton and Chris Cooper, both private landlords, disagree with HMRC’s decision to disallow individual landlords from deducting mortgage interest from rental income before tax is calculated, on the grounds it is ‘distorting competition’ in the buy-to-let sector.
The duo, represented by Cherie Blair QC, have argued that corporate buy-to-let investors are permitted to deduct mortgage interest payments from rental income, allowing them to be taxed on profits and not turnover.
Bolton said: “On Thursday, after months of campaigning, we will find if we have won the right to have a judicial review. We believe this tax change will distort competition whereas HMRC believes individuals and companies are treated differently from a tax perspective and so you can cannot compare the two.”
He added: “We are hopeful and expectant the judge will grant us permission for a full judicial review.”
The landlords used a crowdfunding platform to raise money to fund their legal campaign. In total, Bolton and Cooper have raised £180,000. Several MPs, responding to constituents’ concerns over the harsher taxation rules, are in support of overturning the decision.
Stuart Donaldson, MP for West Aberdeenshire and Kincardine, replying to a constituent, said he was mindful of the worrying possibility that landlords would be forced to either ‘drastically’ raise rental costs or to sell properties.
Donaldson said the Scottish National Party had submitted an amendment to the 2015 Finance Act, which details the tax change, calling on the Chancellor to commission a review of its impact on the availability of affordable housing and to lay the findings before both Houses of Parliament within six months.
Cherie Blair QC and representatives of HMRC will meet for a 90-minute hearing at the High Court in London on Thursday. If the judicial review is allowed, Bolton expects to return to court within two to six months to present the full case.
Cooper and Bolton will be discussing their campaign in more depth at the Property Investor and Homebuyer Show at the Excel in London on 7 and 8 October.