relief for interest on loan to purchase property

relief for interest on loan to purchase property

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A client has taken out a loan to fund the purchase of a property which is to be used in a Close Company of which he is a Director. This took place on the inception of the Company.

The loan has now been cleared but interest of £3200 was paid.

At present we are not certain whether the property remains owned personally by the Director, or whether it has been transferred to the Company. However the question is, can he claim relief for the interest paid on his personal Return?

Had the loan been for the purchase of shares in, or to lend money to the Company, relief would be forthcoming.

SP

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By NeilW
19th Jan 2006 22:10

As I see it
If the property is owned personally, then any interest has to be offset against Property income from the property. No Property Income, no relief. However you may be able to class it as pre-trading expenditure if back rent is paid.

If the property is in the name of the company, then the director has part funded that asset but has no ownership. That looks like a loan to the company of something to me, for which the usual s360 relief should be available.

Does anybody else have a neater solution?

NeilW

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