Cost of borrowing as deductible expense

[eggsnbacon]

Three questions:

1) If I spend £20,000 on interest payments on a loan to buy a property, can I include that £20,000 as a deductible expense when calculating CGT?

2) If I spend £10,000 on interest payments on a loan to refurbish the property, can I include that as a deductible expense when calculating CGT?

3) What is/are the statutory provision(s) dealing with either or both of the above?

Many thanks you in advance.

[darthblingbling]

No and no. Somewhere in ITTOIA 2005

[pawncob]

Legislation doesn't deal with negatives so it won't state that a non deductible item is non deductible, anymore than it would state that feeding the cat is deductible.

[maths]

At its simplest, capital gains tax is a tax levied on gains on disposals of assets of a "capital" nature.

TCGA 1992 sets out the relevant provisions relating to capital gains. TCGA 1992 s38 may be worth a look. Nowhere are items of interest to which you refer authorised as deductions in calculating capital gains.

Interest may be deductible as a revenue expense in ascertaining an individual's liability to income (not capital gains) tax.

[bd6759]

Legislation doesn't deal with negatives so it won't state that a non deductible item is non deductible, anymore than it would state that feeding the cat is deductible.

s38 TCGA specifically states that interest is not deductible.

[jerome.lane]

The legislation is at:

http://www.legislation.gov.uk/ukpga/1992/12/section/38/enacted

The HMRC interpretation clarifying the interest point is at:

https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg15284

You have to be careful with refurbishment costs, as they do not always increase the capital value and such costs would therefore not be allowable enhancement expenditure.

If a company incurred capital enhancement expenditure funded by debt, then those interest costs could be allowable. There's nowhere to go for natural persons to get interest relief on property gains unless they're within the income tax regime (i.e. trading).

If you buy a property with a view to refurbishing and selling for a profit in a short space of time, then you are more likely to be within income tax treatment (especially if you repeat the process) and then your interest costs should be allowable.

You should take advice based on the full facts as the above is only general commentary on your queries and not specific advice.

[pawncob]

Legislation doesn't deal with negatives so it won't state that a non deductible item is non deductible, anymore than it would state that feeding the cat is deductible.

s38 TCGA specifically states that interest is not deductible.

Oh for God's sake, I can't be expected to read everything

[Feedback]

anymore than it would state that feeding the cat is deductible.

what about zoos?