How allowable is interest on a loan taken out after property purchase?
I have a client who has taken out a substantial loan. He rents out property but the loan is not secured on any particular property. There are no other loans.
What are the conditions to “link” the loan to the rented property?
I’m aware of the possibility of withdrawing property capital a/c by way of a loan and getting relief for the interest on the loan up to the value of the capital a/c.
Can any loan be linked and deemed as a loan for the purchase of the property? Given that the loan is taken out several years after the initial purchase, there is no actual flow of funds from the loan to the purchase of the property. It all seems rather nebulous, so I’m struggling to see how one can say “this loan is for the withdrawal of the capital from this rented property”. Or to put it another way, what would prevent a loan being linked?
By the way, the initial purchase was not funded by any loans.
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