Law Society claims the Buy-To-Let property taxation changes are little more than ‘legislation by stealth.’

In last year’s Comprehensive Spending Review, the, then, Chancellor, George Osborne, introduced a series of changes which it was feared could seriously damage the longer term future of the Buy-To-Let market. Foremost amongst these changes was the news that from April this year Buy-To-Let landlords, and those buying second homes, would be required to pay an additional 3 per cent surcharge on the Stamp Duty charged on the property. Previously Mr Osborne had said he intended to ‘start levelling the playing field’ between ‘renters’ and owners, by ensuring that landlords would only receive the basic rate of tax relief on mortgage payments, and this change was seen as proof that he was starting to deliver on that promise.

However, since George Osborne was replaced as Chancellor, significant amendments, which may affect how buy-to-let property is taxed, have been made to the Finance Bill. These amendments were not openly advertised and were slipped in at committee stage. In the view of the Law Society this sort of action sets a disturbing precedent. It believes that by introducing ‘back door’ changes, the government is simply trying to subvert the need for proper scrutiny and full consultation.

Worryingly, the amendments, which significantly alter the way buy-to-let properties will be taxed in the future, may result in profits from the sale of an investment property becoming liable for income tax rather than capital gains tax as at present, the Society said.  In the view of Law Society chief executive, Catherine Dixon, such actions are unacceptable in a democratic accountable society:

‘By introducing a significant change in this way, the government is denying the public the chance to consider and comment on these proposals,’ she said.

‘The way these changes were introduced, in particular without consultation on the draft legislation before it was added to the bill at such a late stage, starts to feel like legislation by stealth.’

‘No matter what the policy proposals, proper consultation and process is vital to maintain public confidence in our democratic institutions,’ she added.

The Law Society’s corporation tax sub-committee has made representations to the government setting out how it believes the proposed amendments will materially change some investors’ tax obligations. Ms Dixon has further called on the government to make its intentions clear, stating that if the government did not intend to make a material change at the committee stage, it must clarify the language in the bill before it is passed.  If, however, it is intent on these changes, it ‘should submit them for proper public consultation and legislative scrutiny’, she argued.

The Finance Bill will go before the House of Commons for its report stage on 5 and 6 September.

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