buy to let - never declared

silvercar

boyse7en wrote: »

>>The initial deposit was arranged by increasing my exisitng domestic mortgage, so I can also claim against the interest on that amount

Are you sure about that? I would seriously doubt that tax relief is available on non-business related loans (i.e. domestic mortgage) even if they were used to raise capital to start a business.

You can. Mortgage interest upto the value of the property when you first letted it is an allowable expense. Where (or indeed if) you secure the money is not relevant.

Business mileage @ 40p per mile for the first zillion miles is allowed if the journeys were solely for attending your letting business.

silvercar

SquatNow wrote: »

If you morgaged you own home to fund the deposit you'll be hard pressed to show it's a business, so you'll probably end up paying a big tax bill.

The dates the mortgage was taken out will tie up and the paper trail will show where the money has gone.

Its an allowable expense.

Read here: http://www.hmrc.gov.uk/manuals/bimmanual/BIM45700.htm

In particular, example 2: "Although he has withdrawn capital from the business the interest on the mortgage loan is allowable in full because it is funding the transfer of the property to the business at its open market value at the time the business started."

boyse7en

I've looked at your example, and don't agree with your assesment. The example given shows a loan against a business asset (the mortgage on rental flat) which is given full tax relief. The domestic property he is living in (the flat in Rotterdam) gains no tax relief as it is a domestic property.

If the OP were to increase the mortgage on his BTL and use that capital drawdown to pay off part of his domestic mortgage, he will be able to claim tax relief on the full mortage interest on his BTL.

silvercar

Maybe I picked the wrong example. The principal stands.

You purchase a buy-to-let, say you have 50% deposit in cash and you want a mortgage for the rest. If you take a mortgage on the BTL property you will probably pay half a percent more than a mortgage you could get on your residential home. So you take the mortgage on your home. The purpose of the mortgage is for the BTL so the interest is an allowable expense.

Ask any tax accountant.

cagey76

cheers silvercar, I read this sometime back, it certainly helps with the figures.

Thanks for the mileage advice.

Griptool

cagey76 wrote: »

Hi,

I have had a buy to let for 3 years but as I have never had to fill in a self assessment tax form, I have obviously not declared the property.

To be honest it does not make a profit, and I would intend declaring it if I sold.
.........
Any help appreciated.

Why are you persisting with a BTL if you are losing money?

benood

Rather than go directly to HMRC I would personally engage a tax accountant, that way if it did turn nasty you already have someone to talk to about it.

Of course this might be expensive so if you're certain you are losing money perhaps it's unnecessary.

macaque_2

By the sounds of it, you are not in a particularly difficult position. Whatever you do though, be very careful. Tax evasion is a criminal matter and people do get long prison sentences for it.

http://news.bbc.co.uk/2/hi/business/6238918.stm

Failing to declare the capital gains from the sale of a property would probably be very dangerous.

silvercar

That's scaremongering, here is the statement from the IR:

http://www.hmrc.gov.uk/workingtogether/news/times-buy-to-let-shock.htm

"Media reports on HMRC approach to landlords
Many of you will have seen recent media coverage relating to HMRC and it’s approach to landlords and you may be receiving queries from your clients about this.
By way of background, HMRC is not planning a tax crackdown in the way implied in the media reports. HMRC is planning to take a concerted approach to helping landlords of all descriptions (not just in the buy to let market) to understand and comply with their tax obligations in what they recognise to be a complex area. In taking this approach the explicit presumption will be that the majority of landlords want to make a correct return but that many may need some help to understand exactly how to do so. The approach, which was outlined to agent representatives in a recent workshop, will focus on giving landlords improved access to guidance and support so that they can understand how to calculate their own tax liabilities and, where there is tax to pay, using the lightest possible touch to ensure that the correct amount is paid."

Starting points:

http://www.directgov.gov.uk/en/MoneyTaxAndBenefits/Taxes/TaxOnPropertyAndRentalIncome/index.htm

http://www.directgov.gov.uk/en/MoneyTaxAndBenefits/Taxes/TaxOnPropertyAndRentalIncome/DG_10013435

boyse7en

>>You purchase a buy-to-let, say you have 50% deposit in cash and you want a mortgage for the rest. If you take a mortgage on the BTL property you will probably pay half a percent more than a mortgage you could get on your residential home. So you take the mortgage on your home. The purpose of the mortgage is for the BTL so the interest is an allowable expense.

OK, so if I have two houses, one BTL with £100k mortgage and £80k mortgage on my home I would currently get tax relief on the interest payment only on the £100k BTL mortgage
What you are saying is that if I raised the mortgage on my home to £180k and paid off the BTL completely I could then claim tax relief on the whole £180k (providing the BTL is worth more than £180k)

Have I got that right? I'm tying myself in knots trying to work out the logic...