My client had a mortgage taken out on a property he was renting out.
He also owns a limited company and is the sole director.
He was reducing his property income by the mortgage interest.
His limited company borrowed money from a bank and he used that money to pay off the mortgage.
He's now upset that I have said he can't deduct any interest because he isn't paying any interest.
He says he should be able to deduct the interest from his property income. He's not happy with my suggestion that the company can claim tax relief on the interest paid by the company. This is because he is unsure about the profitability of the company.
I have suggested that if he wants to deduct interest payments from the property income he should provide a loan from the limited company to himself. I would think that would cause problems with the company having to pay s455 charges.
I haven't yet got to the stage of explaining that he wont be able to deduct all the interest payments because of the reduction of taxibility of mortgage interest.
What suggestions do people have about what could be done?