Mortgage Advisor - Capital or Revenue

[stephenp]

Hi Does anyone know if the cost of a mortgage advisor is a capital costs or a revenue cost?
Thanks

[Tax Accountant]

Hi Does anyone know if the cost of a mortgage advisor is a capital costs or a revenue cost?
Thanks

This is what the HMR&C manual has to say:

''Costs incurred in obtaining loan finance for a rental business are generally deductible in computing rental business profits provided they relate wholly and exclusively to property let out on a commercial basis. These costs include loan fees, commissions, guarantee fees and fees in connection with the security of a loan.''

''Expenditure on professional fees of a revenue nature are deductible if they are incurred for the purposes of the rental business. Professional fees are not allowable if they are capital or they are not incurred wholly and exclusively for the purposes of the rental business. Generally, the fees are capital if they relate to a capital matter, such as the purchase of property.''

I trust this answers your query.

Ramnik

[stephenp]

So i would say that this is a capital matter, so when i come to sell the property i just add this to the purchase cost in calculating my gain.
can i offset any of the original solicitors costs and valuations against this even though the original costs were associated with the purchase for a residential purpose.
Thanks

[Tax Accountant]

So i would say that this is a capital matter, so when i come to sell the property i just add this to the purchase cost in calculating my gain.

Why would you say this? I don't think I said this.

can i offset any of the original solicitors costs and valuations against this even though the original costs were associated with the purchase for a residential purpose.

If the property is subsequently let, yes.

Thanks

See reply above.
Ramnik

[stephenp]

hi,
you said that anything that is relating to the purchase would be capital, thinking about it i suppose that the mortgage advisor is not relating to the purchase but related to the raising of finance to fund the purchase. so in this case the mortgage advisor costs would be revenue expense and any other costs at the purchase should be capital, such as solicitors fees and valuations? is this correct????
thanks

[smythie]

Stephen,

Sorry for butting in on your thread, but you are asking the same questions that I would like answers to and I have another that i hope someone can reply to. What do the mortgage arrangement fees fall under? Capital or revenue? My costs have been added to the mortgage which I am paying for on an interest only basis. If it is a revenue cost then I think I am ok to claim tax relief at the end of the year but if it is capital then I will have to look at this later.

Mick

[stephenp]

i think the arrangement fee is revenue as it is associated with the finance rather than the purchase of the house
Steve

[Tax Accountant]

hi,
you said that anything that is relating to the purchase would be capital, thinking about it i suppose that the mortgage advisor is not relating to the purchase but related to the raising of finance to fund the purchase. so in this case the mortgage advisor costs would be revenue expense and any other costs at the purchase should be capital, such as solicitors fees and valuations? is this correct????
thanks


Your question was rather vague, hence my reply could only be in general terms.

You asked:

''Hi Does anyone know if the cost of a mortgage advisor is a capital costs or a revenue cost?''

It is not clear from your question for what purpose you paid the mortgage advisor. Was it to buy your main home, a second home, a home abroad or relating to a property you bought for letting?

Basically, loan arrangement fees charged relating to raising a mortgage to buy a property for letting is an allowable cost of your lettings business.

I hope this is clear.

Ramnik