More than 700 buy-to-let landlords are set to challenge the government's "Alice in Wonderland tax grab" in court.
The legal campaign to fight “punitive” tax relief changes for buy-to-let landlords has progressed to the next stage.
Two landlords, Steve Bolton and Chris Cooper, are set to challenge the Government on behalf of 737 campaign supporters and 250 Platinum Property Partners.
Legal opinion from law firm Omnia Strategy LLP, led by Cherie Blair MBE QC, has stated that the campaign has a “reasonable chance of success”.
The follows successful fundraising which a £50,000 target raised in a matter of days via the Crowd Justice website.
The legal team has now issued a Pre-Action Protocol Letter to HMRC.
The letter, which has been issued on behalf of co-claimants Steve Bolton and Chris Cooper, calls for a Judicial Review of the Government’s policy change announced in the summer Budget 2015 which restricts buy-to-let mortgage interest tax relief from April 2017.
The Government must respond to the letter by Wednesday 10 February.
The new policy will prevent landlords with mortgages from offsetting mortgage interest costs against rental profit before calculating tax, which landlords claim overturns a fundamental business principle where income less costs equals profit.
This will result in some landlords who finance their business with mortgages paying tax despite making no profit on their letting business.
The legal challenge seeks to overturn what it calls an "Alice in Wonderland" tax because of its absurd nature and separation from real life.
Steve Bolton said: “This tax grab is unfair, undemocratic and underhanded, and we believe it is unlawful on a number of points.
“In no other business are costs wholly incurred to fund the business liable for taxation.
“The change discriminates against the typically smaller landlord who may incur effective tax rates of over 100% while making an economic loss, and gives an unfair commercial advantage to many other categories of landlord unaffected by the change.”