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Interest deduction for additional borrowings

Where are we with the deduction allowed for rental properties in respect of interest

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Having trawled through Accounting Web and the PIM and BIM I'm wondering if anyone has any recent experience of how the land lies with a deduction from rental income for additional borrowings where an individual has borrowed in order to withdraw some of theit original capital investment in the property?

The HMRC manual information totally contradicts itself in places and the underlying legislation s34 ITTOIA 2005 would seem to prohibit the additional interest but until the instance in 2017 it was accepted practice to allow the interest as long as the capital account did not become overdrawn.

In part I think how you phrase the purpose of the additional borrowing might be the key- is it so the individual can buy a new car OR is it replacing an interest free loan from the individual with an interest bearing loan from the bank...

I would be really grateful of any thoughts / comments.

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By Accountant A
31st Jul 2019 11:57

As far as I recall, the law hasn't changed but HMRC were reported to be pursuing a case based on their revised interpretation.

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Replying to Accountant A:
By Tax Dragon
31st Jul 2019 14:07

Accountant A wrote:

As far as I recall, the law hasn't changed....

Other than the restriction to BR relief for interest, I agree.

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By gainsborough
31st Jul 2019 14:50

BIM45700 (example 2) still gives a case where the mortgage interest would be allowed as long as the capital account doesn't become overdrawn.

I haven't seen anything on the case mentioned above since Rebecca Cave's article a couple of years ago - at that stage the case was due to go to the FTT....

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