is loan interest allowable?

mknight · Postby **mknight** » Tue May 20, 2008 6:44 am

I borrowed Â£20k against a commercial property I own. The money was used to pay off a debt.

Is the interest on the loan an allowable deduction against the rental income?

If so, a link to the appropriate HMRC citation will be appreciated.

Peter D · Postby **Peter D** » Tue May 20, 2008 6:53 am

It depends on what the money was used for. Was this a business debt or a personal debt. Regards Peter

mknight · Postby **mknight** » Tue May 20, 2008 7:31 am

A personal debt (paying off tax liabilities to HMRC). Unrelated to the commerical property.

Peter D · Postby **Peter D** » Tue May 20, 2008 7:47 am

No. Regards Peter

King_Maker · Postby **King_Maker** » Tue May 20, 2008 2:39 pm

If it was to re-finance your business capital account (and the total loan did not exceed the value of the property when the property was intorduced into the business), then the answer is Yes.

The utilisation of the loan proceeds is not relevant.

mknight · Postby **mknight** » Wed May 21, 2008 2:03 am

The total loan did not exceed the value of the property.

However, I am not exactly sure what you mean by "to re-finance your business capital account".

King_Maker · Postby **King_Maker** » Wed May 21, 2008 3:50 am

To get the flavour of it, have a look at Example 2 in the Inland Revenue's Business Income Manual at section 45700 :

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

Granville · Postby **Granville** » Mon Aug 17, 2009 1:19 pm

My wife and I recently negotiated a mortgage on attractive terms on our main residence with the intention of investing it in residential or commercial property. The loan is in a separate Bank Account and interest paid will be clearly identified. Will the Revenue allow us to declare the mortgage interest as an expense against rental income on the new property?

is loan interest allowable?

Re: is loan interest allowable?