Client requires a mortgage for a property they are intending to rent out.
The bank will provide 75%, but to provide 95% will cost an additional fee of £1,500. Would this be allowable against Schedule A income, or would it be a 'cost of acquisition' for CGT purposes?
Chris McLaren
Replies (3)
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The latter
It isn't a cost of servicing the loan, it is an incidental cost of obtaining a larger loan. As such, it is capital (creating an asset - i.e. the extra 20% of the loan principal - of enduring value to the letting business).
Disagree
Surely incidental costs of obtaining loan finance are specifically allowable under S58 ITTOIA 2005? Although this section relates to calculating the profits of a trade, S272 says that profits of a property business are to be calculated in the same way as the profits of a trade, and in particular S58 is listed as being a section applicable to calculating the profits of a rental business.
Another question
Sorry to hijack the thread but I have a client with similar circumstances and with added complications. I asked a question a couple of weeks ago but had no replies, if anyone could give me their views I would be grateful.The bones of the problem are as follows
My client has paid for seminars on property letting and for discounts on property purchase. The amount paid is about £7,000 and has been paid to a UK company. For this the client has been to seminars on topics relating to letting property. He has also received discounts on property purchase. For instance the company buys a block of flats from a developer before they are built at a discounted cost. The company then sells the individual flats to subscribers at a rate which is below current market value.
How should these costs be treated?
(the original question is here https://www.accountingweb.co.uk/cgi-bin/item.cgi?id=146631&d=972&h=973&f=785&dateformat=%25o%20%25B%20%25Y)
Many thanks
Tim