Hi all
A client with few rental properties sold one and had a CGT liability which he couldn't pay. HMRC allowed a bit of time and he took a loan secured on his principal home to pay off the CGT. All his rented properties have no loans or mortgages (all freehold).
I noticed his accountant in the rental income SA calc has allowed interest on the loan as an expense. To me that is an error as it was used to pay off a tax liability and not anything commercially related to his business.
Am I right? Or have I missed a trick somewhere?
Any advice would be great.
Replies (4)
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I would say not allowable
Based on advice given to me by an Inspector - the loan is neither secured on a business asset neither has it been applied for a business purpose. Now, if he had instead secured it on one of the rental properties ...
All personal
Secured on personal asset. To pay personal liability. I can't see a justification for deduction.
If the property business had taken out the loan...
If the property business had taken out the loan, to allow him to withdraw capital, the interest would have been allowable. (Need to take care with identifying "capital".)