BTL Mortgage Broker fees + Product Fees

[tommys1985]

Hi All,

I am looking to get some views on the following:

1. I have a BTL which was re-mortgage recently.
2. Broker charges fees + the product had fees charged by the lender.
3. Can I take both of above as expenses? Or these need to be treated like interest and 50% disallowed for 18/19?

[pawncob]

Opinions vary, but this seems definitive.
http://www.fyldetaxaccountants.co.uk/property-articles/are-lender-arrangement-fees-tax-deductible-for-landlords/

[robbob]

3. Can I take both of above as expenses? Or these need to be treated like interest and 50% disallowed for 18/19?

Re-financing costs are restricted in the same manner as interest with regard to the "50% interest and similar restriction - basic tax credit given" test


https://www.gov.uk/hmrc-internal-manuals/property-income-manual/pim2054

Deductions: interest: restriction for income tax purposes from 2017/18: introduction
The restrictions apply in respect of:
Interest and other finance costs on loans taken out for a property business which involves the letting of residential properties.
Any payments which, although not described as interest, are made in connection with a relevant loan and are economically equivalent to interest in the hands of the recipient. This would include amounts chargeable under Chapter 2A, Part 4 of ITTOIA.
Any incidental costs incurred in obtaining the loan. This includes items such as fees or commission payments, but would exclude, for instance, exchange rate losses on a loan taken out in a currency other than sterling.

[tommys1985]

3. Can I take both of above as expenses? Or these need to be treated like interest and 50% disallowed for 18/19?

Re-financing costs are restricted in the same manner as interest with regard to the "50% interest and similar restriction - basic tax credit given" test


https://www.gov.uk/hmrc-internal-manuals/property-income-manual/pim2054

Deductions: interest: restriction for income tax purposes from 2017/18: introduction
The restrictions apply in respect of:
Interest and other finance costs on loans taken out for a property business which involves the letting of residential properties.
Any payments which, although not described as interest, are made in connection with a relevant loan and are economically equivalent to interest in the hands of the recipient. This would include amounts chargeable under Chapter 2A, Part 4 of ITTOIA.
Any incidental costs incurred in obtaining the loan. This includes items such as fees or commission payments, but would exclude, for instance, exchange rate losses on a loan taken out in a currency other than sterling.

"Any incidental costs incurred in obtaining the loan. This includes items such as fees or commission payments, but would exclude, for instance, exchange rate losses on a loan taken out in a currency other than sterling."

From above broker and product are "fees" and hence deductible? I am confused.

[robbob]

Tommys

"Any incidental costs incurred in obtaining the loan. This includes items such as fees or commission payments, but would exclude, for instance, exchange rate losses on a loan taken out in a currency other than sterling."

From above broker and product are "fees" and hence deductible? I am confused.

Hello Tommys

I am confused that you are confused

Having said that i think i understand your confusion

There are two separate questions here

First question is IGNORING ANY INTEREST RESTRICTION ISSUES - are the fees allowable ? ie in a similar manner as interest is allowable ignoring the restrictions.
The answer to this question is yes.

second question do i have the same restriction issues with these fees that i have with the associated interest amount.

again the answer is yes

So that kind of explains the allowable non allowable nature of the answer - the costs are claimed but are subject to the 50% interest restriction block.

Apologies if your confusion is about something else and i have added further to the confusion.

[tommys1985]

Tommys

"Any incidental costs incurred in obtaining the loan. This includes items such as fees or commission payments, but would exclude, for instance, exchange rate losses on a loan taken out in a currency other than sterling."

From above broker and product are "fees" and hence deductible? I am confused.

Hello Tommys

I am confused that you are confused

Having said that i think i understand your confusion

There are two separate questions here

First question is IGNORING ANY INTEREST RESTRICTION ISSUES - are the fees allowable ? ie in a similar manner as interest is allowable ignoring the restrictions.
The answer to this question is yes.

second question do i have the same restriction issues with these fees that i have with the associated interest amount.

again the answer is yes

So that kind of explains the allowable non allowable nature of the answer - the costs are claimed but are subject to the 50% interest restriction block.

Apologies if your confusion is about something else and i have added further to the confusion.

"Any incidental costs incurred in obtaining the loan. This includes items such as fees or commission payments, but would exclude, for instance, exchange rate losses on a loan taken out in a currency other than sterling."

Doesn't above means that it is outside of the 50% exclusion and can be charged fully?

[robbob]

"Any incidental costs incurred in obtaining the loan. This includes items such as fees or commission payments, but would exclude, for instance, exchange rate losses on a loan taken out in a currency other than sterling."
Doesn't above means that it is outside of the 50% exclusion and can be charged fully?

No it is saying exactly the opposite if you read the linked page - that linked page says restrictions apply for all of the following listed items and then includes those incidentals costs in the list of items where the restrictions apply.

https://www.gov.uk/hmrc-internal-manuals/property-income-manual/pim2054

Relevant finance costs
The restrictions apply in respect of:
Any incidental costs incurred in obtaining the loan. This includes items such as fees or commission payments, but would exclude, for instance, exchange rate losses on a loan taken out in a currency other than sterling.