We remortgaged our residential house in 2017 and increased 50k borrowing to fund our first ltd company buy to let flat, so the deposit of the first company buy to let flat comes from the 50k borrowing and our 30k director's own money. this 80K in total was a no interest director’s loan to the company. Can we claim mortgage interest on the 50k borrowing and the mortgage arranging fee/remortgage solicitor /bank transfer fee as revenue expense? Any advise appreciated!
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The thing is, the company hasn't paid any interest, if I read your post correctly.
Is that so ?
Ah, right. So the company has borrowed some money from a bank and is paying the loan off.
Meanwhile, you've taken out a £50k loan secured on your house, paying interest on this, and you've lent this + another £30k of your own savings to the company interest free ?
Is that right ?
The company can't claim for interest which you pay.
However, if you can identify the interest on this additional loan, you may be able to claim against your personal tax under the head of "lending money to a company which is used wholly and exclusively for the purposes of its business ..."
Have a look at ITA 2007, ss 392-395 to see if you're eligible.
Thanks lionofludesch
had a look at ITA 2007, ss 392-395 and think we are eligible. will be claiming this as a interest expense but do we split the total in 2 for separate tax return or one of us can claim the whole amount? I don't suppose there is any tax relief on the mortgage arrange/solicitor fee/bank transfer fee for our residential remortgage?
The presumption would be 50:50 unless you can show otherwise.
Don't see why the charges can't be claimed as an "incidental cost of obtaining finance".
What if you adjusted (corrected?) the company accounts to show there is no £50k director loan but you have a £50k beneficial interest in the property that is owned by you jointly with the company and then the rental profit is self-assessed accordingly in relation to your respective share in the property (a bit like partnership accounts)? (Or maybe that's too much hassle.)
both company directors's personal name are on the residential house deed
If by that you mean the house they're living in, that's irrelevant.
Whose name is on the deeds of the house the company bought to rent out ?
But not a ginormous stretch if that more accurately reflects the reality (since any such shared beneficial interest need not be registered at HMLR but is a matter of fact) .
But not a ginormous stretch if that more accurately reflects the reality (since any such shared beneficial interest need not be registered at HMLR but is a matter of fact) .
Maybe.
On the other hand, if we're saying it's interest to buy a share in this rented property, relief might be restricted these days. As a loan to a company, it wouldn't.
There would be no interest restriction in the human's ITSA since it's all W&E etc. re his % share.
You don't think that 75% would be allowable and he gets a tax credit on the other 25% ?
Can you back that up anywhere ?
Depending on your personal tax position, you could charge the company interest on the directors loan/funds given to the comany- £80k. This would be tax dedutable and the company would need to submit the quarterly CT61 returns etc. ( ie deduct basic rate tax and pass over)
Imortantly the interest you receive will be subject to personal tax and hence your personal tax position needs to be considered. You dont want to be paying 40% tax on interest and getting a 19% C tax deduction
I wouldn't have thought that the interest paid by the director would be eligible for tax relief as the company is an investment company, not a trading company. Happy to be proved wrong though.
don't think a residential buy to let company is .
https://www.gov.uk/hmrc-internal-manuals/company-taxation-manual/ctm60710
Correct.
Tick VG
Hard to say definitively that your accountant is wrong but, in general, a company renting out property is NOT an investment company.
It's a mistake that was made on here fairly recently