Would a mortgage Early Redemption Charge be tax-deductible on BTL property?

MonkeyDr

Hi,

(I have asked this on the 'cutting tax' board and had no replies, so thought that I would try here. I hope that that's ok.)

Does anyone know if an ERC would count as an allowable expense to be offset against tax for a BTL property?

About a year ago the consent to let on my flat that I let out was expiring, so I obtained a BTL mortgage. I had a to pay an early redemption charge as I was still in a fixed rate period. I can see from the HMRC manual that I am (currently - I know this will change) allowed to deduct the arrangement fee for my new BTL mortgage:

"PIM2066 - Deductions: General rules: Main types of expenses: Fees for loan finance etc.

Costs incurred in obtaining loan finance for a rental business are generally deductible in computing rental business profits provided they relate wholly and exclusively to property let out on a commercial basis (see PIM2005). These costs include loan fees, commissions, guarantee fees and fees in connection with the security of a loan, (ICTA88/S77 or ITTOIA05/S272)."

However, I am not sure if this applies to ERCs too, and can't see anything specific about that.

I would be grateful for any help. I have no intention of defrauding HMRC.

MD

Thrugelmir

An ERC is a business expense so there's no reason why it shouldn't be tax deductible.

MonkeyDr

Thank you. That's my interpretation too, but I wasn't sure.

MD

Mr_DB

Take a look at BIM45820.

In most curcumstances trading income rules apply to a property business.