Surely it is not possible for the government to cap tax relief where existing property investors invested in good faith-I believe the courts could not impose retrospective tax -anyone any views on this?
One good reason to eliminate it is the abuse of current system via interest-only mortgages, whereby a landlord will deliberately keep their interest bill high in order to get the state to subsidise it. He is better off keeping his spare cash on deposit at 2.5% approx than paying it off his mortgage (where he will save only 58% [100%-42%] of the 3% interest rate). We might as well just throw our taxes straight into the landlords and the banks instead.
From a legal view point I thought retospective tax penalties which is what this amounts to would be struck down by the Courts if it were tested -to me it would seem to me that the governmednt are estopped from changing the rules of the Contract -the principle of estoppel
Bottom line Tibbs is that they could - but the won't, it would send all the wrong signals for future investment and would lead to a housing crisis with all investors leaving the market. The cost to the government would be enormous.