Hmrc taxed me on foreign mortgage account interest.

sloaney_2

I have a foreign mortgage account in Cyprus, and as the bank opened it in my name the hmrc in the uk say it is my savings and taxed me on interest. I explained that it was what I owed to the cyprus bank for a mortgage I'm paying off and not a savings account, and sent mortgage paperwork to them, but they said it was unfortunate but I still have to pay. The account balance is the ammount I owe the bank for the mortgage and not my savings. Is this right as I've had to pay £600 when I have no savings? Can any one advise?

BoGoF

"Thanks for that not sure where i needed to be. They said as it was an account in my name with a balance and interest earned then I had to pay tax on it. The only trouble is it is the banks money not mine as they have leant me the money to buy the property, and the balance is the mortgage balance that I owe them."

This is what you posted in response to my question on the other board. Do you know where the info came from to HMRC reach this conclusion?

System

sloaney wrote: »

I have a foreign mortgage account in Cyprus, and as the bank opened it in my name the hmrc in the uk say it is my savings and taxed me on interest. I explained that it was what I owed to the cyprus bank for a mortgage I'm paying off and not a savings account, and sent mortgage paperwork to them, but they said it was unfortunate but I still have to pay. The account balance is the ammount I owe the bank for the mortgage and not my savings. Is this right as I've had to pay £600 when I have no savings? Can any one advise?

If the capital is making interest and that is available for you to use then it's yours and you are liable for UK tax on the interest made.

sloaney_2

yes they contacted me after running a check on me and said that I have a foreign bank account with savings that I earned interest on. I replyed to say it was a mortgage account and sent the statements and mortgage agreement to them, but they said I owed the tax. I rang them and the officer who had my case said it was unfortunate but as the account is listed as mine I owe the tax. He said he has seen it a lot and it is the way some foreign countries list accounts, but according to the uk I owe the tax. It seems very unfair and doesn't seem right.

BoGoF

Just to clarify, is there a positive balance on the account or not?

sloaney_2

There isn't a credit balance now as it was for an off plan property and the developer did a draw down on the account, so there is nothing there now, but a couple of years ago there was the full amount there - put in there by the bank - and that is where the hmrc was taxing on.

BoGoF

Did the foreign bank credit you with any interest?

sloaney_2

Yes there was, but is it mine or the banks, as the mortgage amount is what I agreed to and doesn't include any interest deducted.

BoGoF

So where did the interest go, did they take it as payment towards the mortgage?

sloaney_2

No, the only amount that went to the mortgage was the first amount that was credited into that account by the bank. I don't know where the interest went.

Mikeyorks

So the 'off plan' developer drew down both the Mortgage plus the interest? So you have benefited by the interest value?

If not - ask the developer to return it if the mortgage + deposit = the agreed purchase price?

But - either way - HMRC consider you have earned interest on money deposited in your name.