Tax Forum :: Free Tax Advice

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!

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.

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?

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.