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ERC on BTL that is being remortaged to a residential? tax deductible?

63e300
63e300 Posts: 10 Forumite
Third Anniversary First Post
in House buying, renting & selling
Slightly niche scenario.

Current BTL mortgage is expiring in 2024 but we have decided to remortgage the property onto a residential and move in there.

We will be paying around £2000 in an ERC.

Can we offset this against out rental income the way we would with interest.

Its a rental expense but more in disposing of the rental property itself but equally cant be offset against capital gains tax?
«1

Comments

  • Mstty
    Mstty Posts: 4,209 Forumite
    1,000 Posts First Anniversary Photogenic Name Dropper
    Sadly not 😞
  • anselld
    anselld Posts: 8,708 Forumite
    Part of the Furniture 1,000 Posts Name Dropper
    edited 25 August 2023 at 11:08AM
    Don’t see why not, it is an incidental cost of finance on the BTL mortgage on termination.  Limited to 20% rate like other finance costs though.

  • 63e300
    63e300 Posts: 10 Forumite
    Third Anniversary First Post
    Conflicting advice here. Wonder what the answer is 
  • Mstty
    Mstty Posts: 4,209 Forumite
    1,000 Posts First Anniversary Photogenic Name Dropper
    Google suggested no but realistically the answer sits with an accountant.

    What do you expect with the internet except diametrically opposed views.
  • sheramber
    sheramber Posts: 23,642 Forumite
    Part of the Furniture 10,000 Posts I've been Money Tipped! Name Dropper
    https://www.gov.uk/hmrc-internal-manuals/business-income-manual/bim45820

    The following items are specifically excluded from the relief for incidental costs of loan finance:

    (c) the cost of repaying a loan or loan stock so far as attributable to its being repayable at a premium or having been obtained or issued at a discount, and
  • anselld
    anselld Posts: 8,708 Forumite
    Part of the Furniture 1,000 Posts Name Dropper
    edited 26 August 2023 at 5:49AM
    sheramber said:
    https://www.gov.uk/hmrc-internal-manuals/business-income-manual/bim45820

    The following items are specifically excluded from the relief for incidental costs of loan finance:

    (c) the cost of repaying a loan or loan stock so far as attributable to its being repayable at a premium or having been obtained or issued at a discount, and
    Carry on reading ...
    "The majority of break payments that take the form of a penalty for early redemption of the loan will represent genuine compensation to the lender. In such circumstances the break payment will not amount to a premium and will therefore attract relief as incidental costs of raising loan finance."
  • 63e300
    63e300 Posts: 10 Forumite
    Third Anniversary First Post
    Is this relevant when we are paying the ERC to move in as opposed to moving onto another BTL mortgage? 
  • theartfullodger
    theartfullodger Posts: 15,870 Forumite
    Part of the Furniture 10,000 Posts Name Dropper
    See if lender (current lender) will do a deal to hold onto your business.  Asking costs nuffink.
  • 63e300
    63e300 Posts: 10 Forumite
    Third Anniversary First Post
    How would that benefit them? We need to move in the provider doesnt provide residential mortgages. 
  • anselld
    anselld Posts: 8,708 Forumite
    Part of the Furniture 1,000 Posts Name Dropper
    63e300 said:
    Is this relevant when we are paying the ERC to move in as opposed to moving onto another BTL mortgage? 
    You are not paying ERC to move in.  As the name suggests, you are paying to redeem your BTL mortgage early.  Therefore it is an incidental cost of the BTL mortgage.  Whatever the business reasons that have persuaded you to terminate the BTL Business at this particular time are not relevant.

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