What can I put in my proprietors capital account? ... Allowable Interest

[madpommie]

Hi All

What out of the following items that I have personally funded can I charge to my proprietors capital account?
-Stamp Duty / Deposits / Financing / Legal on properties completed.
-Stamp Duty / Deposits / Financing / Legal on off plan properties that won't complete for 6 to 12 months?
-Furniture used to furnish flats?
-Rental Income / SA105 Expenses? aka P&L
-Rainy Day Money in case interest rates hike or I have a nasty expense??? This one feels dodgy!!!

My reason for asking is that I want to know what I can charge interest to my buy to let business (not limited) on.

If have a woolwich offset account and I am fairly sure that I can offset the interest on this basis.

From Inland Revenue Website
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Wholly & exclusively: overview
http://www.hmrc.gov.uk/manuals/bimmanual/BIM37007.htm

"Apportionment and duality
When you consider the application of ICTA88/S74 (1)(a), it is important that you distinguish between cases where:

a) A definite part or proportion of an expense has been laid out or expended wholly and exclusively for the purposes of the trade, profession or vocation. That part or proportion should not be disallowed on the ground that the expense is not as a whole laid out or expended wholly and exclusively for the purposes of the trade, profession or vocation.

Wholly & exclusively: duality of, or non-trade, purpose: non travel topics: interest payments
http://www.hmrc.gov.uk/manuals/bimmanual/BIM37680.htm

"The Special Commissioner recognised that any method falling short of analysing each and every movement on the capital account would lead to inaccuracy:

In reaching a decision I have borne in mind that the question to be answered in the appeal (and in this determination) is how much of the loans were used for private purposes? Any method other than analysing each withdrawal will be to some extent inaccurate but an attempt has to be made. The long-term loans referred to by the taxpayer formed part of his overdrawn capital account and it is the interest on the loans which is to be disallowed. I can see no authority for treating repayments of the loans as creditors in this calculation."
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Kind Regards
Dave

[Tax Accountant]

Question: ''My reason for asking is that I want to know what I can charge interest to my buy to let business (not limited) on.''

ANSWER: You cannot charge any interest to your own buy to let business. Period on the basis that you cannot profit from yourself.

In any case, if you were allowed to, any interest charged to your BTL business will become your personal income. Therefore, any benefit to your BTL business will be neutralised.

Ramnik

[madpommie]

I disagree with your answer!

This is capital that I have put into the business and if I was in a position to remortgage the property and take my capital back out the interest is fully deductable against the business.

Just because my PPR mortgage is mixed use, some being from my PPR and some going into the buy to let business does not make it disallowable. See links to IR website.

Cheers
Dave

[Tax Accountant]

Either you are not asking the right question or that I have not correctly understood your question.

My earlier answer was in reply to your question: ''My reason for asking is that I want to know what I can charge interest to my buy to let business (not limited) on.''

My answer is that you cannot yourself charge any interest to your own business. On the basis of your question as above, my answer still stands.

However, it seems that your question is really different to what you are actually asking. I think you mean your question to read something like: How much can I remortgage upto on my BTL business and obtain tax relief on interest charged by the lender.

Is this the right question?


Ramnik

[madpommie]

I remortgaged my PPR by £80k using a Woolwich Openplan Offset Account.

With the 80k I bought 2 off plan properties. One has just completed and is let. The other is not due to complete until next year.

I know that I can claim interest relief from my PPR as per the info from the IR website.

What I am not clear on is that whilst I have acutally paid cash out on certain items whether I can include them in my calculations. e.g can I claim interest on money that paid stamp duty?? Can I claim interest on money that funded stamp duty and deposits on a property that isn't finished yet?

Cheers
Dave

[Tax Accountant]

I remortgaged my PPR by £80k using a Woolwich Openplan Offset Account.

With the 80k I bought 2 off plan properties. One has just completed and is let. The other is not due to complete until next year.

I know that I can claim interest relief from my PPR as per the info from the IR website.

What I am not clear on is that whilst I have acutally paid cash out on certain items whether I can include them in my calculations. e.g can I claim interest on money that paid stamp duty?? Can I claim interest on money that funded stamp duty and deposits on a property that isn't finished yet?

Cheers
Dave

I still don't understand your question fully.

Basically, all interest paid on the £80,000 re-mortgage advance is an allowable expense of your lettings business regardless of what you have used the money for.

Where did you pay the stamp duty etc from? Is this paid from a different account? Is interest being charged on this account? If yes, any interest relating to the payment of stamp duties etc can also be claimed in your lettings business.

Ramnik