Cherie Blair is spearheading a campaign to attack the government’s decision to prevent landlords from deducting mortgage interest from rental income before they are taxed.
The campaign, which is being headed up by Blair’s firm Omnia Strategy, is being driven by Steve Bolton and Chris Cooper, two private landlords angry about the prospective changes.
The pair are campaigning to fight HMRC and the Treasury to abolish the ruling, which is set to be phased in from 2017, which will see individual landlords taxed on turnover rather than profit. It also calls for the amount of relief for top rate tax payers can claim on their buy-to-let mortgage reduced from 45% to the basic rate of income tax, which is currently 20%. The ruling is being challenged on the grounds that it is a breach of landlord’s human rights because they are being treated differently to their counterparts in the corporate world.
Cherie Blair has hit the headlines recently as she added four properties to her £25m portfolio of 38 homes just before the stamp duty increase. With a vested interest in the results of the case, it is likely that Mrs Blair may be the very best person to be heading up the campaign!
Bolton and Cooper are funding the legal case through donations from crowd funding platform, Crowd Justice. The initial figure raised was £50,000 in just eight days, but they need to raise an additional £250,000 to progress the fight to court.
However, many landlords are not waiting around for the results of this high profile case. Instead, they are choosing to explore ways to ‘beat the system’, and many professional advisors are advocating incorporation as an option for landlords looking to transfer their property portfolio.
Registering a property portfolio – whether that portfolio comprises of one property or 100 – is being seen by many as a way around the tax changes. Whilst this may provide the answer to many thorny issues, it does in fact throw up some concerns of its own…
Landlords who choose to take this route in essence have to sell their existing portfolio to the new incorporated company, which will now incur additional 3% stamp duty costs.
Whilst the new company formation may help make savings, it could be a case of robbing Peter to pay Paul, as the hike in stamp duty could in effect wipe out the savings that are being made. There is also the threat of capital gains tax if incorporation relief cannot be claimed.
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