Disgruntled buy-to-let landlords in the UK, caught by a surprise tax increase, are to challenge it in court.
A number of investors are banding together to oppose the tax hike by seeking a judicial review, the legal process by which a court reviews legislation of administrative decisions.
Spearheading their legal team is Cherie Blair’s law firm, Omnia Strategy.
The landlords believe that the new tax disregards the long-held taxation principle that expenses incurred for business purposes are deductible when calculating taxable profits.
They hope a judicial review will overturn "Clause 24" of the 2015 Finance Bill, in which the UK Government announced that it will no longer be possible to offset mortgage interest costs against rental profit.
As a result of the change, some buy-to-let investors will have to pay tax even when there has been no profit or when there is a loss.
The new regulation applies to existing properties as well as any further property purchases.
The Institute of Chartered Accountants in England & Wales (ICAEW) has called the removal of mortgage interest relief "unreasonable, unworkable and unthought through".
It says small property investors will be worst affected, such as savers with one or two buy-to-let properties added to their pension portfolios.
Large companies with residential property investment will not be affected and can continue to claim tax relief.
Wealthy landlords investing with cash, rather than using mortgages, will also be untouched. When George Osborne announced the change, he implied that the extra tax would hit only higher-earning landlords.
The ICAEW says the new situation could make it yet more difficult for first-time buyers and for renters who might face rent increases.
