PIM2110 - what's that all about?

and does it apply here?

Didn't find your answer?

Am dealing with an individual who has come to the UK from New Zealand leaving behind a mortgaged residential property in New Zealand while he is now resident only in UK.  The property is residentially let.  It makes a loss after interest but a profit before.

Is my reading of PIM2110 correct, that he is now obliged to deduct UK basic rate tax from the mortgage interest paid, and then remit said deduction to HMRC?  If so I am curious to know why.  And I don't mean "because the law says so", I am more interested to know what mischief or loss of tax is envisaged that the law seeks to thwart by imposing that requirement.

As I understand it, he will be subject to transitional rules over the next four years that requires him (ultimately) to claim relief for interest as a BR tax deduction, subject to transitional rules.  Does this mean that it is the gross interest (from which he has already deducted 20% at source) that forms the basis of the 20% deduction in his personal tax comp?

With kind regards

Clint Westwood

Replies (2)

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By Dick Stastey
25th Apr 2017 14:10

You are reading PIM2110 correctly, but PIM2110 is not correct. The treatment set out in PIM2110 only applies in relation to "yearly interest arising in the UK" (ITA 2007, s. 874), ie where the loan source is in the UK.

SAIM9000 et seq (SAIM9090 in particular) would be a better read.

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Replying to Dick Stastey:
By Ruddles
25th Apr 2017 15:34

I'm not so sure. When does payment of interest arise in the UK? It can't be by reference to the lender's status - otherwise the provisions could never apply.

EDIT. Forgive my laziness - it's all there in the text referred to. I'm now more sure.

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