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Interest on rental property for repairs

Please confirm that you do not have to adjust the interest on loans for repairs to property

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Please can you confirm that the interest on loans taken out to repair a rental property (not holiday lets) is fully allowable and not restricted as would be mortgage interest.

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By Tax Dragon
29th May 2019 11:03

Unsurprisingly, that's not the case. The ledg doesn't refer to "mortgages", it refers to "dwelling-related loans". It then kindly defines that term for you as "amounts borrowed for purposes of the (property) business".

There's a bit more to it than that, but not much.

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By Accountant A
29th May 2019 11:07

I can't confirm because it's not correct.

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By chancewind
29th May 2019 11:19

My client who is a member of the Landlords association says their booklets say it is allowable. I cannot see anything in hmrc's rental handbook either way

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Replying to chancewind:
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By Tax Dragon
29th May 2019 11:30

Read s272A and B ITTOIA 2005 instead.

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Replying to chancewind:
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By Accountant A
29th May 2019 12:24

chancewind wrote:

My client who is a member of the Landlords association says their booklets say it is allowable. I cannot see anything in hmrc's rental handbook either way

Have you go a link to "hmrc's rental handbook". I've not seen that.

I've just looked that the Residential Landlords Association's site and there's nothing there to support what your client is saying. In the section about tax, they specifically refer to "Mortgage interest and finance costs" which gives some clue that the rules extend beyond mortgage interest.

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Replying to Accountant A:
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By Wanderer
29th May 2019 13:10

Accountant A wrote:

Have you go a link to "hmrc's rental handbook". I've not seen that.

Probably the Property Income Manual.
https://www.gov.uk/hmrc-internal-manuals/property-income-manual
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Replying to Wanderer:
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By Tax Dragon
29th May 2019 13:26

Unlikely. Whilst not as easy-to-read as the legislation, it's still pretty clear.

Maybe the OP is referring to the IR20?

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Replying to Tax Dragon:
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By Vile Nortin Naipaan
29th May 2019 13:44

"the" IR20? Do you perhaps mean booklet IR20?

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Replying to Vile Nortin Naipaan:
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By Tax Dragon
29th May 2019 13:47

Booklet? I was quite little when I read it, so it seemed much more than a booklet to me at the time (which, I admit, was a while ago).

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By Vile Nortin Naipaan
29th May 2019 13:57

Is till have a pdf copy somewhere.

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Replying to Wanderer:
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By Accountant A
29th May 2019 17:12

Wanderer wrote:

Probably the Property Income Manual.

Well if that's what the OP meant, he/she has apparently not read it!

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By Vile Nortin Naipaan
29th May 2019 14:05

I miss the old site. I liked being able to post pictures.

Flow chart

Is it a finance cost? -- No --> See Note 1
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Yes
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Is it a dwelling-related loan -- No -- See Note 2
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Yes
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See Note 3

Notes:
1. Well, what is it?
2. So, why do you even think it might be deductible in the first place?
3. The restriction applies.

NB. Finance costs include interest and other finance costs.

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Replying to Vile Nortin Naipaan:
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By Tax Dragon
29th May 2019 14:19

A worthy appendix to (the?) booklet.

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By fawltybasil2575
29th May 2019 17:47

@ chancewind (OP).

Just to add a link to the legislation (in case it is not readily accessed by you) to which a previous eminent member above has referred:-

http://www.legislation.gov.uk/ukpga/2015/33/section/24/enacted

This of course reinforces the views that the interest to which you refer ["interest on loans taken out to repair a rental property (not holiday lets)"] is treated NO DIFFERENTLY from other loans.

Basil.

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Replying to fawltybasil2575:
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By chancewind
29th May 2019 19:18

thank you for the reply. I have read the legislation and see what you mean. I had adjusted the loan interest as I would have had a mortgage but the client was adamant that it was allowed and I could not see anything in writing to dispute his assertion. I do not think the legislation is really that clear. Many thanks

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