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Mortgage interest paid after purchase of property for letting and before first let – allowable?

Mortgage interest paid after purchase of...

Client purchased a property for letting partly funded with a mortgage. The property required extensive renovations before it could be first let and as a result it was nine months after purchase before the letting commenced.

During that nine months, a large amount of mortgage interest was paid. Can I legitimately claim this as a pre-trading expense? The property was bought with the intention to let, but do the interest payments really relate wholly and exclusively to the letting business as for those nine months capital works were being carried out to put my client in a position to be able to let the property.

Any thoughts gratefully received!



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By Anonymous
04th Dec 2008 15:31

thanks for your feedback...
... but Jason, are you suggesting that the mortgage interest prior to the holiday letting starting can be claimed in full at the time that the property is first let?

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04th Dec 2008 14:02

Mortgage Interest
Assuming this is the first rental property then as far as I am aware the rental business commences when the property is first let and pre trading expenses incurred prior to first let i.e. mortgage interest are claimed as incurred at that point. The avaialbility to let point is irrelevant.

The renovation costs will be capital.

If there is a rental business already up and running then the mortgage interest will be claimed against the overall rental income.

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By Anonymous
04th Dec 2008 13:24

I don't think so
I think the rule is that the property has to be 'available to let' to be able to charge expenses, whether or not there is anyone actually renting it. During a renovation this isn't the case. Again, I think the running expenses during renovation would be allowable in the tax calc when the property was eventually sold. Hopefully someone else can confirm this............

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