Client has bought three rental properties via a new limited company.
Mortgages were raised by the company for the majority of the cost but significant deposits were funded by the client re-mortgaging his existing personal buy to let properties. He is paying the repayments on those personally.
I see two possibilities:
1. He could charge interest to the company which in turn then pays him, less a tax deduction which he claims relief on later. The company is not likely to be profit making for a few years so I then look at the alternative....
2. It is claimed as interest on a qualifying loan under ITA 2007 s392-395 on his personal return to offset tax paid on his other personal income. He owns more than 5% and the properties are let to third parties rather than any connected parties which I believe would block the claim as the company would then be deemed a CIC. I have seen nothing to say you cannot do this and, so far, neither have two HMRC technical officers but they've passed it onto a third one as, in theory, this opens the door for 40% tax relief? The last officer I spoke to said "Qualifying Loan interest relief - I haven't had anyone ask about that for donkey's years!"
I'm reading it and seeing no problem with making the claim but knowing HMRC as we do has anyone heard anything that makes this a non-starter?