Mortgage product fee - Still tax deductible for current tax year??

Collapse
X
  • Filter
  • Time
  • Show
Clear All
new posts

    #16
    Hi Glover
    As promised I have spoken to two separate Tax Accountants , one of whom is a client with a significant number of investment properties and they are both in agreement to the following:-

    Irrespective of whether the Completion Fee is paid by the borrower or have the fee added to the loan, the total cost can indeed be included in your current tax return as a acquisition cost in the same way as Broker/Legal and Valuation Fees , they went on to argue that where the monies are added to the loan, the reality was that the money had indeed been paid but as a loan and the amortised interest reflects the additional costs of borrowing those monies over and above the amount for the property.

    I hope that these two Accountancy opinions resolve an issue which needed clarification.

    Comment


      #17
      Many thanks LA, I really appreciate your help in clarifying this. It will make a significant difference to my tax return, I've also asked a local accountant and he felt that both the ERC and Product fee can be included, once again, thanks.

      Comment


        #18
        All part of the service to the forum readers

        Comment


          #19
          Mortgage fees are indeed finance costs, not capital costs. It is quite well established as per previous quote:

          Arrangement fees are fully tax-deductible against rental profits – finance fees are NOT capital costs. This is the case for any business, not just landlords, for example recently Manchester United re-financed a £500m loan and paid an £8m arrangement fee – the tax treatment is the same for them as for you! For the tax boffins, HMRC even (for the avoidance of doubt) refer to this in their ‘Property Income Manual’, section PIM2066, and the relevant legislation is the Income and Corporation Taxes Act 1988 Section 77, and ‘Income Tax (Trading and Other Income) Act 2005 section 272.
          In general, they should be amortised over the life of the loan, but it is accepted to account for them in one go at the onset if the amount is small in comparison to the interests (which in general it is), as also mentioned.

          Whether the fees are added to the loan or not is quite irrelevant.

          As finance costs, they are subject to the same restriction as interests for HMRC. That's the only that changed since 2015.

          Mortgage broker fees, valuation fees, and legal fees to deal with the mortgage are also finance costs.

          Comment


            #20
            Originally posted by loanarranger View Post
            Hi Glover
            As promised I have spoken to two separate Tax Accountants , one of whom is a client with a significant number of investment properties and they are both in agreement to the following:-

            Irrespective of whether the Completion Fee is paid by the borrower or have the fee added to the loan, the total cost can indeed be included in your current tax return as a acquisition cost in the same way as Broker/Legal and Valuation Fees , they went on to argue that where the monies are added to the loan, the reality was that the money had indeed been paid but as a loan and the amortised interest reflects the additional costs of borrowing those monies over and above the amount for the property.

            I hope that these two Accountancy opinions resolve an issue which needed clarification.
            But presumably subject to the higher rate restriction (ie 50% unrestricted and 50% at basic rate) of both if the remortgage done before 5th April and 25% unrestricted 75% basic rate if done 6th April 2019 until 5th April 2020, thereafter all at basic rate?

            Comment

            Latest Activity

            Collapse

            • Which property to buy
              Propertygoesup
              When buying property either to rent out do you have any no no's or must haves?
              eg some people avoid studio flats or flats in general due to being leasehold.
              In my area however you cant get any decent houses below 250k. My budget currently is 230k so I am just finding flats. I can get a...
              31-01-2019, 11:06 AM
            • Reply to Which property to buy
              AndrewDod
              I would never buy another leasehold property (ever) until the laws involving leasehold are changed, and until it is made possible to actually implement existing law in a plausible manner. The risk is just way too high....
              20-03-2019, 11:16 AM
            • If you were just starting out
              Propertygoesup
              Just interested in how to advise a 20 year old who is just starting out in the real world. They have left school and got an average full time job and can still live at the parents rent free for as long as they like.
              What would your first financial aim be? Would all your savings go into a deposit...
              12-02-2019, 16:29 PM
            • Reply to If you were just starting out
              hech123
              Andrew - That is one of the most ridiculous comments I have heard. A box of chocolates brings in no yield and is perishable so holding it for a long time destroys the contents and brings you no rent. A house on the other hand brings in rent year after year after year after year. The rent increases...
              20-03-2019, 08:39 AM
            • Reply to If you were just starting out
              Dan_Manchester
              Interesting thread with some interesting comments. I would say it’s personal.

              IMO the person needs to sit down and (try to) understand their wants / needs from the short, medium and long term, accounting for their risk profile and personal skill set.

              One size doesnt fit...
              19-03-2019, 18:42 PM
            • Portfolio landlord with 25% deposit but struggling to find a lender
              Spartanlandlord
              I have 6 buy to lets and am currently after a seventh. However, despite having released equity from my residential property, it appears that none of the high street lenders will offer me a mortgage. I know that they take into consideration the whole portfolio but wondered if anyone could recommend...
              07-03-2019, 21:46 PM
            • Reply to Portfolio landlord with 25% deposit but struggling to find a lender
              Dan_Manchester
              In truth how often we are buying properties purely based on numbers? Whilst clearly the numbers need to stack but ignoring the ‘soft side’ of a property could mean you miss out...
              19-03-2019, 18:30 PM
            • Reply to If you were just starting out
              AndrewDod
              That kind of argument makes no sense at all when you do the maths.

              It is like saying "I bought a box of chocolates in 1919 for £1 which I borrowed - which was a hell of a big price back then. I put them in a drawer for 100 years and opened them in 2019. Basically I got them for free...
              19-03-2019, 16:55 PM
            • Reply to If you were just starting out
              hech123
              Andrew - There has been currency devaluation and inflation for 2000 years, it is really not new. I recently spent my holiday reading about the Mississippi Scheme in 1684 set up by a British man in France to create bonds/paper money. There are many such stories when you look back through time. Inflation...
              19-03-2019, 16:30 PM
            • Reply to If you were just starting out
              Gordon999
              Some old houses ( especially those with outside toilet at back of house ) become empty and no one wants to be living there, get vandalised with windows and entrance door boarded up. This causes the property value to fall and has a knock-on effect for the rest of houses in the street and surrounding...
              19-03-2019, 02:37 AM
            Working...
            X