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Where Taxpayers and Advisers Meet

Interest relief on loans used to invest for higher returns

KShah
Posts: 2
Joined: Wed Dec 05, 2018 8:15 am

Interest relief on loans used to invest for higher returns

Postby KShah » Wed Dec 05, 2018 8:29 am

Basically I borrowed at low interest rates from one bank and deposited the same funds in another bank where interest were higher. HMRC have denied interest relief on the interest I pay for these loans on the basis of HS340 which I feel does not apply in the above scenario. Would be grateful for some guidance as I see this as a simple trade - buy cheap for higher returns and don’t see why the income should be taxed but not the deduction!

robbob
Posts: 2662
Joined: Wed Aug 06, 2008 4:01 pm

Re: Interest relief on loans used to invest for higher returns

Postby robbob » Wed Dec 05, 2018 10:07 am

Hello KShah

Unfortunately this is anything but a trade - its fairly well established by the people that know the legislation inside out that you can't claim tax relief borrowing money just to put it in an interest earning savings account. I am presuming there is no associated trading business that would be the ultimate destination of the funds borrowed.

KShah
Posts: 2
Joined: Wed Dec 05, 2018 8:15 am

Re: Interest relief on loans used to invest for higher returns

Postby KShah » Sun Dec 09, 2018 8:20 pm

Hi Robbob

Thanks for responding to me. There is no associated trade. Sounds unfair to me. How are loan sharks like quickquid etc get taxed? It would be a similar principal except they may be getting taxed on the net “commission” they receive?

AGoodman
Posts: 567
Joined: Fri May 16, 2014 3:47 pm

Re: Interest relief on loans used to invest for higher returns

Postby AGoodman » Tue Dec 11, 2018 1:40 pm

It is what it is.
Lenders are trading - their business is making lots and lots of loans.
You are borrowing to invest in another account. You are not trading.


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