Is the arrangement fee for BTL mortgage tax deducatable?

Edtough

As per title please?

Obviously interest paid on mortgage is tax deductable, but what about the arrangement fee?

Thanks guys?

katejo

I don't know the answer but, personally speaking, I don't see why it should be. BTL buyers already have other advantages over first time buyers.

mgarl10024

Yes it is. It is a cost of running the business. Without the BTL, there would be no arrangement fee on the mortgage.

anselld

As i understand it it is deductible over the term of the mortgage. eg £1000 fee for a 20 year mortgage you can deduct £50 per year. You cannot deduct all in the first year.

Halle71

katejo wrote: »

I don't know the answer but, personally speaking, I don't see why it should be. BTL buyers already have other advantages over first time buyers.

Because it's a cost to the business of property management.
All other businesses deduct costs in order to calculate taxable profit so why shouldn't landlords be treated the same?
It's nothing to do with FTB, it just happens that their business necessitates house purchasing.

Halle71

anselld wrote: »

As i understand it it is deductible over the term of the mortgage. eg £1000 fee for a 20 year mortgage you can deduct £50 per year. You cannot deduct all in the first year.

How would this work if, for example, I remortgage 5 years into a 20 year BTL mortgage and pay anther fee? Would the first fee be spread between 5 or 20 years?

Thanks a lot.

00ec25

Halle71 wrote: »

How would this work if, for example, I remortgage 5 years into a 20 year BTL mortgage and pay anther fee? Would the first fee be spread between 5 or 20 years?

Thanks a lot.

tax treatment requires that you follow normal accountancy principles so in theory the arrangement fee should be spread over the life of the finance package to which it relates.

HOWEVER
there is a concession given to individuals (note not to companies) that where the finance costs represent an incidental additional cost when compared to the total interest charge then normal accounting practice is to take the full cost of the arrangement fee in the year it is incurred.
Therefore as the arrangement fee is typically a small % of the total interest cost over the life of the mortgage, you charge the full arrangement fee in year 1 of the mortgage (and the same is repeated for any subsequent remortgage)
http://www.hmrc.gov.uk/manuals/bimmanual/BIM45815.htm