I have just taken over a very small company.
Sole shareholder and director runs his building business through a limited company.
The company also owns a buy to let which is now worth £230,000 according to client.
The property was bought many years ago for £75,000 with a £50,000 mortgage and balance as loan from director.
The property was remortgaged five years ago for £180,000. Previous accountant said interest was only allowable up to £75,000.
Now I know that this would be the case if the property was held individually, but what about this scenario?
The remortgage has been paid out as dividend over the years up to his PA so no further tax to pay. There are still some funds waiting to be distributed.
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I still cannot see anything which would prevent the whole amount being allowable under the loan relationship rules.
Obviously it would not be allowable against trade profits but not for the loan relationship rules.