My client has a trading company and a property investment company. He wants to lend £50,000 from the trading to the property company and for the property company a to borrow the balanceon a mortgage and invest in property. His mortgage broker tells him interest rate on BTL for individuals are much lower than for companies. His friend's accountant has advised him that he can take the funds from the trading company and palce them in trust for the company which allows him as trustee to access lower mortgage rates and for the property to be bought and held in trust for the company which can receive the rent and claim the mortgage costs. I can't see how HMRC would see this other than a personal withdrawal from the cmpany as he has exercised his right as an individual to gift the funds to a trust. There is also the added legal costs of setting up the trust and reporting its tax each year....not to mention the outside possibility of thi being viewed as mortgage fraud?
Does anyone have knowledge of this arrangement and HMRC's position and do other accountants see company loans being dearer that BTL loans to individulas?
Replies (13)
Please login or register to join the discussion.
It's a bit like in the link below, where it seems that unless there is actual intention to misappropriate funds in a (proper) criminal sense no-one is too fussed in practice.
https://www.accountingweb.co.uk/any-answers/interesting-mortgage-fraud-s...
Yes; but even they do not complain in practice as long as they're getting paid etc. (although they would of course be mostly unaware of such nominee arrangements).
I have previously cited cases where judges state such borrower subterfuge is all part & parcel of the lending/borrowing game, or words to that effect and the above SC mortgage fraud case does not seriously challenge such views.
One can only conclude that mortgage fraud means different things to different people (especially judges when there is no element of overt criminality i.e. no deliberate misappropriation of the borrowed funds).
I have previously cited cases where judges state such borrower subterfuge is all part & parcel of the lending/borrowing game, or words to that effect
I wish I'd seen those postings/citations.
Done. FYI: "borrower subterfuge" came back with no hits; "mortgage fraud" gave me something about wife swapping and your recent @DW OP - everything else is ancient news (if that's not an oxymoron); I have stopped with those two searches.
I forget you're a bit of a Johnny-come-lately here.
Terrace Hill (Berkley) Ltd [2015] UKFTT 75 (TC).
https://www.accountingweb.co.uk/any-answers/rents-from-property-held-as-...
In a similar vein, it's fine for a blue chip mortgagor to lend his name to a mortgage and have no beneficial interest in the property and the man (or woman) of straw joint legal owner and joint mortgagor can have the sole beneficial interest per par 95 here:
https://www.bailii.org/ew/cases/EWHC/Ch/2021/229.html
Clearly that's gaming the mortgage process too (essentially acting as a nominee) with no evidence of any judicial disapproval.
The trouble with these type of structures is they can easily be torpedoed by a simple change in legislation
Moreover there is more than no impact from lying to the lender. How do you explain on re-mortgage when you supply the SA302's when the flippin 'eck the rental income is? its bad enough explaining vanilla situations to lender, let alone lies..
it seems like "flavour of the month" arrangement which the borrower will then get stuck in. Beware advice which stands on a very narrow platform. it might seem very clever a t the time, but you soon fall on your behind. See I don't know, circumventing PAYE legislation with pretend loans?
Agree all the way
Mortgage renewal will a real pain.
They cannot understand the simple stuff, it will be an issue explaining clever shenanigans
Either own it or let the company borrow
There's that programmer, QI, when an alert goes off when someone gives a predictable wrong answer.
There has never been an avoidance case where the loans were found to be pretend loans.
As a learned judge once said, tax avoidance is the spur to executing genuine (i.e. not pretend) documents, or words to that effect.