The attempt to seek a Judicial Review of legislation reducing the mortgage interest tax relief for landlords has failed.
The case was brought by landlords Steve Bolton and Chris Cooper; they were represented by law firm Omnia Strategy LLP, led by Cherie Blair QC.
In a joint statement, Bolton and Cooper said they were “outraged” by the decision.
“It has completely missed the opportunity to protect tenants, landlords and the housing market from the disastrous consequences of Section 24. Sadly it will be tenants who are hit hardest; they are set to see unprecedented rent increases over the coming months and years, which will be a very clear and direct consequence of this ludicrous legislation.
“For many, it will also mean the loss of their homes because vast numbers of landlords will be forced to exit the market. Hard-working, responsible landlords will have their pension plans in ruins, but the large corporations and the wealthiest in society, who can buy property without the need for mortgage finance, are systematically excluded from this unfair tax policy.
“Now that the legal route has run its course, we will be focussing 100 per cent of our attention and resources on taking our case more forcefully, more powerfully and more directly, right to the heart of government. Our goal is simple: to abolish this tax or to remove the retrospective nature of it.”
The legal argument - extensively covered for around a year on Letting Agent Today - concerned the alleged discrimination against individual landlords contained in Section 24 of the Finance (No 2) Act 2015; the core of this section was the phased reduction of mortgage interest tax relief for landlords paying higher rates of income tax.
The allegation was that individual landlords were denied the same rights as, for example, large scale corporate and institutional landlords which can set their finance costs off against their income and be taxed only on their profit.
Cherie Blair described Section 24 as "manifestly unreasonable" with no evidence that landlords were effectively preventing first time buyers from purchasing homes - one of the reasons cited by former Chancellor George Osborne in his Budget in 2015 that introduced the mortgage interest tax relief change.
The campaign led by the landlords claimed individual buy to let investors would have to pay extra tax of 20 per cent or more of their mortgage interest payments. The tax they pay might be greater than their real profit, leaving them with a rental loss and a cash shortfall.
This tax would only have affected individuals who own rental properties in their own names, like the millions of small landlords in the UK. Companies owning buy to let property and wealthy cash investors were excluded from the tax.
Richard Lambert, chief executive of the National Landlords Association - which supported the action - said the decision was disappointing for landlords and tenants, who would now see their rents rise as a consequence of the changes to landlord taxation.
“While we have never been convinced that there was a solid enough legal case to overturn George Osborne’s decision, we hoped the Courts would be prepared at least to listen to the arguments. We congratulate Steve, Chris and the campaign team on their determination, perseverance, and their success in raising awareness and increasing the visibility and understanding of what will be a dramatic change to the ability of hard working people to provide homes for others” says Lambert.
“This issue has been the focus of the NLA’s lobbying for the past 15 months and, as the UK’s largest representative body for landlords, we are still committed to changing this damaging policy through political engagement and lobbying. We urge all landlords to join us in this fight.”