Valuation costs as "allowable expence"

[maaz-man]

Hi

Can costs of raising funds one one's home to buy an investment property be taken as allowabe expense against the income from the new property?

Alternatively when remortgaging a preowned investment property, bought with private loan, to release equity, to payback the original loan, can costs of arranging the mortgage be counted as an allowable expence against the rental income from it.

Any view? If any one has any reference to such costs that will be great.

Regards
Maaz

[sober]

Maaz

As I understand, in the first case you definitly can, as explaind in many other similar posts.

However, the 2nd case is a bit trickey - as it could be argued the "wholy and exclusively" principle is not met. As one doesn't normally need to refinance to get the equity out - unless not doing it could force you out of the letting altoger.

Perhaps someone with more experince can give a view.

regards
sober

[Tax Accountant]

Hi

Can costs of raising funds one one's home to buy an investment property be taken as allowabe expense against the income from the new property?

Alternatively when remortgaging a preowned investment property, bought with private loan, to release equity, to payback the original loan, can costs of arranging the mortgage be counted as an allowable expence against the rental income from it.

Any view? If any one has any reference to such costs that will be great.

Regards
Maaz

Inland Revenue says as follows:

'Broadly speaking, expenses are allowable as long as they are incurred wholly and exclusively for business purposes AND are not of a capital nature.'

More specifically, it states that:

'Costs deductible include loan fees, commissions, guarantee fees and fees in connection with the security of a loan.'

In deciding the 'wholly and exclusively' rule it doesn't matter whether the expense was necessary. It doesn't include the word 'necessarily' as is the case with claiming expenses against employment income.

I would say that both kind of expenses mentioned in your query would be deductible.

One is allowed to replace one qualifying loan, even if it is private, with another and all costs associated with that should be allowable.

Ramnik

[maaz-man]

Thank you for your replies.

This is the clearest interpretation I have received - much appreciated.
This opens up doors previoulsy thought closed for a number of people - first time buyers, I know who have private loans from their families and have been stuck - not being able to repay them or expand without increasing their cost base considerably.

Kind regards
maaz

[Tax Accountant]

Thank you for your replies.

This is the clearest interpretation I have received - much appreciated.
This opens up doors previoulsy thought closed for a number of people - first time buyers, I know who have private loans from their families and have been stuck - not being able to repay them or expand without increasing their cost base considerably.

Kind regards
maaz

You are welcome.

To make absolutely sure when in doubt, it is always best to obtain paid professional advice or to obtain a ruling from the Inland Revenue by writing to them, not over the telephone.

Consider paying forward for the free advice by helping others when you have no obligation to do so.

Ramnik

[maaz-man]

Hi Ramnik,

Yes - for sure.

I have passed your responses to a couple of people who were very interested.

I will certainly help when ever I can - in tax matters I have learnt quite a lot from your posts and from others' as well - the best thing I can do is to refer them to this esteemed forum. I think one of them has already joined the forum (or will be joining soon) as a result.

Another, point, I would whole heartedly recommend your services to anyone who is in need of the same, if you so wish.

Best regards
Maaz

[Tax Accountant]

Hi Ramnik,

Yes - for sure.

I have passed your responses to a couple of people who were very interested.

I will certainly help when ever I can - in tax matters I have learnt quite a lot from your posts and from others' as well - the best thing I can do is to refer them to this esteemed forum. I think one of them has already joined the forum (or will be joining soon) as a result.

Another, point, I would whole heartedly recommend your services to anyone who is in need of the same, if you so wish.

Best regards
Maaz

Thank you. Let's see what develops. I actually meant helping others in your particular or different field, financially or otherwise.

Ramnik