Remortgage Expenses

[Friston]

I took out an AbbeyN Mortgage against my own home to buy a BTL ( better rate than BTL mortgage and 100% advance of the BTL value)
When it came to buying a second BTL I decided to increase my Mortgage by the full value of the 2nd BTL. However Abbey wanted to charge too high a rate and it made economic sense to switch to the Portman. This obviously attracted a redemption penalty from Abbey and a new re-mortgage charge
from Portman ( It was still worth doing!)

Question 1:
Is the Arrangement Fee due to the Portman an expense that can be set against tax?
Question 2:
Are the Solicitors Fees for the remortgage an expense that can be set against tax?
Many thanks

[Tax Accountant]

I took out an AbbeyN Mortgage against my own home to buy a BTL ( better rate than BTL mortgage and 100% advance of the BTL value)
When it came to buying a second BTL I decided to increase my Mortgage by the full value of the 2nd BTL. However Abbey wanted to charge too high a rate and it made economic sense to switch to the Portman. This obviously attracted a redemption penalty from Abbey and a new re-mortgage charge
from Portman ( It was still worth doing!)

Question 1:
Is the Arrangement Fee due to the Portman an expense that can be set against tax?
Question 2:
Are the Solicitors Fees for the remortgage an expense that can be set against tax?
Many thanks

I have not checked this conclusively, but I believe that both these expenses could be claimed as an expense of your lettings trade as they relate to raising finance for the business and not for acquisition of the property.

Ramnik

[JDO]

Karongo, I hope you dont mind me joining in on this posting but I have had a similar experience to Friston.

I have recently remortgaged one of my btl properties and incurred the following costs...

Redemption penalty
Mortgage discharge fee
Admin fee
Solicitors fee
Local authority search fee
Water board search fee
Bank transfer fee

Am I correct in saying that all of the above costs can be offset against my rental income when I submit my next tax return?

Regards

John

[Tax Accountant]

Karongo, I hope you dont mind me joining in on this posting but I have had a similar experience to Friston.

I have recently remortgaged one of my btl properties and incurred the following costs...

Redemption penalty
Mortgage discharge fee
Admin fee
Solicitors fee
Local authority search fee
Water board search fee
Bank transfer fee

Am I correct in saying that all of the above costs can be offset against my rental income when I submit my next tax return?

Regards

John

Hi John,
Yes, I believe that these would be eligible expenses of your lettings business.

Ramnik

[JDO]

Karongo, thank you for your reply.

You are an asset to this forum...keep up the good work...!

Regards

John

[Tax Accountant]

Karongo, thank you for your reply.

You are an asset to this forum...keep up the good work...!

Regards

John
Thank you John,

I can now confirm from the Inland Revenue manuals that ''costs incurred in obtaining loan finance for a rental business are generally deductible in computing rental business profits provided that they relate wholly and exclusively to property let on a commercial basis. These costs include loan fees, commissions, guarantee fees and fees in connection with the security of a loan.''

There are apparently no direct references to redemption penalty or mortgage discharge fees. However, as these are in connection with the original loans for the rental business, they would be allowable. You may find that most redemption penalties are actually additional charge for interest.

I hope this helps.

Ramnik