redundancy insurance as deductable expense

[alex_bisgrove]

Newby looking for help :confused:. I'm trying to determine if the insurance payments made for employment redudancy insurance can be claimed as expenses against my BTL rental income, the logic being if I'm made redundant I will make use of this insurance to ensure my BTL mortgage payments continue to be made. Is this a claim too far for the ILR ?

[jeffrey]

Was the insurance a pre-requisite for (or part of) the mortgagee's offer of advance to you, or was it voluntary on your part?

[alex_bisgrove]

it was volentary, not with the same provider as the mortgage and taken out later than the mortgages, as I type it is not sounding too promising

[jeffrey]

Problem: how can you prove that it's wholly and exclusively connected with the mortgage advance financing your purchase of the BTL?
The phrase is critical- expenditure that isn't cannot be offset against taxable income.

[alex_bisgrove]

I was relying on the same sort of "logic" that under BIM 45700 allows me to claim some of my residential mortgage interest as a taxable expense. I can show I have sufficient savings to cover my other bills for 12 months should I be made redundant (insurance only pays out for 12 months), hence I can justify the insurance to pay my BTL mortgages should there be a need to, (i.e. if I had no job and no tenants)

[Telometer]

If the expense is tax deductible, then the income would be taxable if it ever paid out as it would be income of your BTL business albeit secured against your job. Surely you wouldn't want that.

Face it, this has nothing to do with your BTL, this is redundancy insurance. Your BTL should make a profit on its own - if you want to insure anything, you should be insuring against tenancy voids. Pretty pointless IMHO.

[alex_bisgrove]

thanks telometer, not the answer I wnated but your analysis is razor sharp. My "problem" is with interest rates so low my rental properties are too profitable and I've runout of ideas to reduce it while hanging onto the cash. Death and taxes, tricky to avoid.

[Telometer]

Throwing money away with redundancy insurance is not an effective way of mitigating a tax liability. If you're making that much profit, much better to put the spare profit on one side as a cash buffer. Your redundancy insurance will never pay out in a worthwhile fashion anyway. Usually doesn't start for 6 months; only runs for a year - and the premiums are painfully high.

What about undertaking repairs. New roof? New kitchen? By bringing forward expenditure you bring forward the tax relief. However, it sounds as though you are at the limit cashflow wise, so again, incurring expenditure for tax relief purposes is pointless.