Remortgage Interest

Property investors should be aware of a change in stance at HMRC on "Buy To Let" mortgages.

Heres an example :

1n 2010, James buys a BTL property for £100K using £25K of his own funds as a deposit and raising an interest only mortgage of £75K. 

In 2017, the property value has risen to £155K.

James remortgages for £100K; the £25K he has added to the mortgage and being the withdrawl of his original own funds is used to buy a jet ski (not for business purposes).

Previously, HMRC manuals indicated that the increase in the mortgage, as long as it didn't exceeed purchase price, was a return in investment finds introduced and, would of meant thst the interest on the £100K mortgage would of been allowable ( subject to the new interest allowability restrictions).

However, during 2017 HMRC manuals have been rewritten and the guidance (which is all manuals are) says that inspectors should only allow the intest on the £60K as the additional £40k has not been used "Wjholly and Exclusively" for the benefit of the trade.

Where does that leave the property investor ?

Watch this space.

HMRCs stance seems, in our opinion, illogical and unfair.

Undoubtedly there will be a test case to establish a principle of law. 

Until that occurs, if these circumstances apply to you, you should take professional advice.