An umarried couple bought a property together for £115K. They initially borrowed £108K to fund this purchase. The property was immediately let as a BTL & she declared 100% of the income/costs on her Return on the basis that she was the beneficial owner.
They then split up & she bought him out. She borrowed a further £51K to fund this, so total lending of £159K.
Is tax relief due on the interest on the full borrowing of £159K or should it be restricted to £115K.
Replies (7)
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Your question does not make a lot of sense, because you say they bought the property “together”, whereupon “she was the beneficial owner”. Then the beneficial owner paid a lot of money to acquire something she was apparently already the sole beneficial owner of!
Its very relevant.
Either she bought the whole of the property at the start so that is her base cost for the balance sheet, or bought the property into two tranches, so first part at the first price, second part at the second price paid.
If you can solve the ownership issue, you have solved the tax issue, and perhaps correct the returns if applicable.
If the OP struggles to see that point, perhaps s/he could ponder why the client has 100% of the original borrowing - and then had to borrow some more.
At least one member of the set comprising HMRC, the lender(s), the client and the OP has been lied to; it's possible that at least one has been defrauded.
I won't be allowed...
Not a position any employer should put their employees in. You have my sympathy.
I'm being told...
Now we know the (sub)set of those being lied to includes the OP.