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Buy to let mortgage tax relief fight to go to courts

24 March 2016

Tax Relief Fight Court The legal challenge from landlords against changes to the taxing of mortgage interest relief has moved a step nearer the courts as the government indicated that they are ready to fight the action.

Buy to let investors Steve Bolton and Chris Cooper launched the legal fight a few weeks ago to force a judicial review in the High Court to scrutinise cutting tax relief on finance interest for landlords paying higher rate tax.

HM Revenue and Customs and The Treasury were served with court papers claiming the move to cut mortgage interest relief for the highest earning landlords was unfair and impacted on their human rights.

Their lead barrister, former prime minister Tony Blair’s wife Cherie argued that the legislation did not affect other landlords paying basic rate tax or other businesses and ended “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”.

The latest progress on the case is updated online, where the pair have confirmed a response to their court filing.

“We don’t really want to say much more at this stage as we do not want to give the other side early warning about our case,” said a statement from the landlords.

“We now need to speak with our lawyers before issuing any form of statement to ensure that our case is not prejudiced in any way. Sorry we can't share more at this stage but it is critical we take legal advice and ensure we follow the correct protocols.”

The new tax rules will reduce finance interest relief for landlords paying higher rate income tax to 20% from 2019-20.

Chancellor George Osborne expects to start phasing in the reduction from April 2017.

The measure also changes the way property rental business profits are calculated, making turnover rather than profits taxable and then offsetting a 20% credit for mortgage interest relief.

Keep up with the latest development s in the case on the campaign’s Facebook page