I have a client who has remortgaged an investment property that his company owns. Accounting under FRS102.1a. They remortgaged and was charged a £2k arrangement fee which was added to the loan (interest only).
I've done the whole effective interest. I've done the whole effective interest rate calculation for the accounting, but now, thinking about the corporation tax I'm not sure what the treatment of the mortgage interest would be. There are a few scenarios that I could think of
- Tax follows the accounting treatment as a trading cost
- Tax follows the accounting treatment but as a non-trading loan relationship (don't think it would be this one)
- The whole bank fee is treated as a taxable cost, and the interest is adjusted accordingly to be non-amortised interest rate.
There may be other options. I'm happy to do the reading and research but would really appreciate a nudge in the right direction. It hasn't come up for me before and I'm struggling to cut throught he vast swathes of HMRC handbooks etc.
Thanks in advance