Property 118 and Cotswold Barristers win their appeal against HMRC

This is a significant win for landlords and their advisers, but it does not mean every buy-to-let owner should rush to incorporate. The Tribunal cancelled HMRC’s decision to issue Scheme Reference Numbers, which matters because that kind of warning label can make sensible tax planning look suspicious before the detail has been properly tested. For landlords, the key point is simple: incorporation is not wrong in itself. It can help some larger landlords with long-term planning, reinvestment and passing property on, but it still has to be right for their circumstances. Tax, mortgages, ownership, future income and costs all matter. This ruling is not a loophole or a free pass. It is a reminder that proper advice, clear paperwork and a genuine commercial reason remain essential.

This is an interesting case that I suspect is only in its infancy; it may well go all the way up to the Supreme Court. The silence around it, apart from Property 118 itself, makes it feel like the calm before a storm.

A scheme reference number was never HMRC saying the planning works. The law is clear that a number is not a ruling on tax advantage, and if a tribunal cancels the allocation HMRC must withdraw the number. Ten days in the First-tier Tribunal are reported to have removed a label. Removing a label is not the same as being told your planning is right.

For the buy-to-let sector, the risk has moved. It is no longer a warning label on your file. It is your own paperwork. Nothing here changes the rules on moving a rental business into a company. What decides that is whether your letting is really run as a business, and whether you claim. Incorporation relief puts off a capital gains tax bill when the business moves across. It used to be automatic. For transfers from 6 April 2026 you have to claim it, and a 2026-27 move needs it in by 31 January 2029. Miss the date and you lose the relief. The number to remember is not a scheme reference. It is 31 January 2029.

This decision puts to rest, for now at least, the uncertainty that has dogged worried landlords for the last two years.

The substantial incorporation system ( SIS ) was a legal strategy to help landlords counter the effects of Section 24 changes which led thousands of landlords worse off and HM Treasury better off due to the restriction of relief being limited to a tax credit of 20% on the interest paid.

Many lenders unfamiliar or wary of the law and accounting principles surrounding the SIS naturally treated it with caution. Some lenders assisted clients to complete the “incorporation” process by moving the title to the limited company. In reality this is a client friendly method as properties can be transferred to the limited company as and when the fixed rates expire. The alternative is to suffer huge exit fees.

Most of these clients are professional landlords who run their portfolios as a business.

The ruling paves the way for more lenders to open their doors.

This is a major victory for Property118, but it is not a permission slip for every landlord to incorporate. The Tribunal has cancelled HMRC’s Scheme Reference Numbers, removing the DOTAS label and the Stop Notice that had placed a cloud over these structures. That should restore confidence and reopen conversations many landlords and advisers had understandably frozen.

But winning the DOTAS argument is not the same as winning every tax argument. The ruling does not automatically confirm Section 162 relief, SDLT treatment, mortgage compliance or the outcome for every portfolio. Incorporation remains a forensic, case-by-case decision involving the business test, ownership, debt, lender terms and long-term plans.

The sector should celebrate HMRC being successfully challenged, but not turn the judgment into a marketing slogan. It removes a major barrier; it does not remove the need for proper advice.