The Guardian and The Telegraph have posted articles in the last week picking up the quandary of buy-to-let landlords. By a combination of changes in the summer budget and autumn statement, the previously lucrative venture whereby landlords would purchase property with the sole intention of renting has now been placed “in the red”. Landlords could previously claim tax relief on mortgage interest payments at the marginal rate, but from April 2017 to 2020, this will gradually be reduced to 20% (the ‘Clause 24’ change). “Wear and tear allowance” previously allowed landlords to deduct 10% from rental profits, but from April 2016 will only be granted for costs actually incurred. Meanwhile, George Osborne used the autumn statement to increase stamp duty on purchases of buy-to-let and second homes by 3%.
Landlords unsurprisingly are less than happy with the legislative changes. A group representing 250 landlords is seeking to launch a legal challenge by way of judicial review of the Finance (No. 2) Act 2015 enacting the ‘Clause 24’ change to mortgage relief (see: s. 24). As The Guardian reports, the group claims that the measure breaches Human Rights Law and EU Law, whilst The Telegraph reports the group as claiming that the move flouts “a long-established principle of taxation that expenses incurred wholly and exclusively for the purposes of the business are deductible when calculating the taxable profits”. It would seem from these statements that the claims pivot upon establishing that the new legislation breaches either Article 1, Protocol 1 of the European Convention on Human Rights (‘A1P1’), some common law right or EU State Aid Law. These are my rough guesses based upon very rough information. Although the former two will have little prospect of success in the courts, the latter EU Law point could well have some bite. This will be used as a springboard for a more general discussion about the development of EU State Aid Law