Can benefit in kind tax be offset from rental income tax?

Jflet5

Hi,

I have a question regarding my tax liability for the coming year.

I work for a bank and have taken advantage of a staff mortgage deal which I have on a property I now rent out. As the interest rate is not publically available I am obliged to pay benefit in kind tax on this (based on the benefit I receive through paying a lower rate of interest to the one set by the Inland Revenue)

As the Inland Revenue rate for beneficial loans is quite high at the minute the tax liability could be significant. However, as you can off-set interest payments on mortgages from rental income would I be able to off-set the benefit in kind tax I need to pay? (as essentially this is an interest cost the Inland Revenue are assuming I would have paid had I been on a ‘normal’ rate of interest).

Hope that makes sense.

fengirl_2

There are two different issues here.
Relief is due on the interest paid on the mortgage on the let property, but this is only available against the letting income which is assessable under Schedule A or Sch D, case VI. If the expenses on the let exceed the income, the loss can only be carried forward to set against future profits.
The difference betwen the interest paid on the loan and the notional rate of interest gives rise to a charge to income tax and is chargeable under Schedule E.

Jflet5

Thanks for your reply.

Under Schedule A then could i add the benefit in kid tax payment to the interest paid on the mortgage and get relief on that? It's seems fair to me as in effect it is an interest payment....or a payment made to supplement the interest i should have paid.

fengirl_2

No, my point is that these are two different charges and are not inter changeable. The tax on the benefit is the tax on the benefit. It is not interest. It cannot be offset against the tax on the letting income.