Remortgage Costs - Tax Deductable?

[Ian999]

Hi, Hopefully someone can help. Can anyone tell me if the costs of remortgaging a property (to enable purchase of another property) are allowable expenditure for income tax purposes?

The costs I am refering to are the solicitor costs, the survey fee, the mortgage arrangement fee, exit fee (from the initial lender). Are these costs treated as revenue or capital?

To summarise, when completing my tax income tax return, can I deduct the above expenses from my rental profit?

Thanks:)

[TaxationPete]

http://www.hmrc.gov.uk/manuals/PIMMANUAL/PIM2000.htm
http://www.hmrc.gov.uk/manuals/bimmanual/BIM46400.htm

Should tell you. Regards Peter

[TaxationPete]

Why re-mortgage rather than raise a new B2T mortgage on the new purchase it may be cheaper. Regards Peter

[Tax Accountant]

http://www.hmrc.gov.uk/manuals/PIMMANUAL/PIM2000.htm
http://www.hmrc.gov.uk/manuals/bimmanual/BIM46400.htm

Should tell you. Regards Peter

I am intrigued by this new style of answering.

I have looked at both above manuals and could not readily see that any of them answer the query.

Ramnik

[Tax Accountant]

Hi, Hopefully someone can help. Can anyone tell me if the costs of remortgaging a property (to enable purchase of another property) are allowable expenditure for income tax purposes?

The costs I am refering to are the solicitor costs, the survey fee, the mortgage arrangement fee, exit fee (from the initial lender). Are these costs treated as revenue or capital?

To summarise, when completing my tax income tax return, can I deduct the above expenses from my rental profit?

Thanks:)

I have not researched the query in detail but am of the opinion that they should be allowable as far as they relate to the existing BTL property and not to the purchase of the new property.

Ramnik

[TaxationPete]

Sorry if I confused anyone but the link leads to all expense including this http://www.hmrc.gov.uk/manuals/PIMMANUAL/PIM2005.htm which deals with loans and financing it works for me. Regards Peter

[Ian999]

Hi,

Thanks for the advice. I think I should have been a bit clearer intially. What I have done is borrowed money to initally purchase and renovate a property. I have then rented out this property and remortgaged it to repay the origional loan. I have then taken out another loan to buy a 2nd property and did the same thing....so although the loan interest payments are a deductable for income tax purposes, I wanted to find out if the cost of the remortgage is a deductable for income tax or CGT?

Thanks:)

[smythie]

More often than not arrangement fees are added to the overall mortgage sum which you then pay interest on. If this is the case then surely you are not allowed to offset this sum when completeing your tax return. Different for one off payments for valuations etc, that you can claim for.

Mick

[smythie]

More often than not arrangement fees are added to the overall mortgage sum which you then pay interest on. If this is the case then surely you are not allowed to offset this sum when completeing your tax return. Different for one off payments for valuations etc, that you can claim for.

Mick

[TaxationPete]

What was the purpose of the loan. You normally have to state a reason. What is it. Regards Peter

[niknik]

Hi. What is the B2T mortgage referred to? Thanks

[Tax Accountant]

More often than not arrangement fees are added to the overall mortgage sum which you then pay interest on. If this is the case then surely you are not allowed to offset this sum when completeing your tax return. Different for one off payments for valuations etc, that you can claim for.

Mick

Whether an expense is added to the loan or not should not make any difference to whether it is an allowable expense or not.

Loan interest is also added to the loan and it is still an allowable expense.

Likewise, deposit interest is also added to the deposit account balance but interest is still taxed as income.

Ramnik

[Tax Accountant]

Hi,

Thanks for the advice. I think I should have been a bit clearer intially. What I have done is borrowed money to initally purchase and renovate a property. I have then rented out this property and remortgaged it to repay the origional loan. I have then taken out another loan to buy a 2nd property and did the same thing....so although the loan interest payments are a deductable for income tax purposes, I wanted to find out if the cost of the remortgage is a deductable for income tax or CGT?

Thanks:)

Did my earlier reply not answer your query?

Ramnik

[smythie]

Thanks for the reply Ramnik,

So, are the arrangement fees classed as revenue costs or capital costs?

Mick

[Tax Accountant]

Thanks for the reply Ramnik,

So, are the arrangement fees classed as revenue costs or capital costs?

Mick

This has already been replied in my previous postings on this thread.

I cannot see how arrangement fees can ever be a capital cost. Finance cost is usually an allowable revenue expense of the lettings business.

Ramnik

[smythie]

Many thanks Ramnik, I must have missed your earlier statement.

Mick

[Grange]

I have not researched the query in detail
Indeed, so it appears. Have a read of s59 of ITTOIA 2005.

but am of the opinion that they should be allowable as far as they relate to the existing BTL property and not to the purchase of the new property. Ramnik

Not necessarily.

In calculating the profits of a trade or property business, a deduction is allowed for incidental costs of obtaining finance by means of a loan if the interest on the loan or stock is deductible in calculating the profits of the trade.

Incidental costs means expenses incurred on fees, commissions, advertising, printing and other incidental matters and which are incurred wholly and exclusively for the purpose of obtaining finance or providing security for it.

To the extent that the costs of the survey/solicitor etc. relate to the costs of acquisition of the property rather than the acquisition of the loan, then they are not deductible - until you sell the property at which point they come into your CGT calculation.