Matthew Posted October 3, 2007 Report Share Posted October 3, 2007 Hi, If I renovate a property for 2 months which is subsequently rented out, can I offset the interest paid on the mortgage in this period? or this this another thing which can be offset as part of CGT when you sell? Thanks, Mat. Link to comment Share on other sites More sharing options...
Simon Dewsberry Posted October 3, 2007 Report Share Posted October 3, 2007 Rightly or wrongly Mat I have been offsetting this cost for years ! Sur plym will answer though ! S Link to comment Share on other sites More sharing options...
Matthew Posted October 3, 2007 Author Report Share Posted October 3, 2007 Yeah got to admit it is a difficult one for the Tax office to question. Example: One Landlord buys a property and renovates it for 1.5months, tenant found and moves in exactly 2 months after purchase. Another Landlord buys a property, doesn't need renovating, tenant found, but still onlt moves in 2 months after purchase. If they don't allow interest to be offset when renovating, which I have a feeling they may not, then the second landlord could offset the interest and the fist landlord not. But then the first landlord could just not mention the renovation to the TAx office and say it took 2 months to find a tenant. More comments welcomed on this, but expect Plym will have the definative answer. Thanks, Mat. Link to comment Share on other sites More sharing options...
Simon Dewsberry Posted October 3, 2007 Report Share Posted October 3, 2007 As you can claim during voids, and also the fact that this "money" is not improving prop in any way dont see why it should be treated as anything other than as a legitimate expense ie servicing of a BTL loan ??? Simon Link to comment Share on other sites More sharing options...
plym77 Posted October 10, 2007 Report Share Posted October 10, 2007 Providing that the interest paid on the loan is in persuance of your letting business, I would not see issue with this. With regard to Simon's comment, agreed that interest can be claimed for void periods too - providing this is not excessive - for example, leaving a property 'vacant' without making an effort to find tenants (whether sucessful or not) for a few years would probably cause issue with claiming mortgage interest if there is arguement that the property was no longer part of the letting business - you would need to take each case on its own merit. A circumstance in which interest cannot be claimed is when a property is taken out of your letting business, for example, assume you take your property out of the letting business to be used by family for 6 months, then this 6 month's worth of interest would not be claimable. Another example would be someone who had always rented the property, but then wishes to sell it vacant. When the final tenant leaves, the landlord may choose to keep the property for six months to renovate it for sale - assume this all happens within the same tax year - you would be unable to claim 12 months interest against 6 months rent, as the final 6 months interest was paid due to renovation to sell, and thus has nothing to do with the letting business. Regards Sherena Link to comment Share on other sites More sharing options...
Simon Dewsberry Posted October 10, 2007 Report Share Posted October 10, 2007 you would be unable to claim 12 months interest against 6 months rent, as the final 6 months interest was paid due to renovation to sell, and thus has nothing to do with the letting business Hi Sharena What about the other side if the coin...ie renovating for 6 months to let ...assumming bought on BTL finance and works beggining immediately on completion ? Simon Link to comment Share on other sites More sharing options...
plym77 Posted October 10, 2007 Report Share Posted October 10, 2007 Its a difficult one Simon and down to individual circumstances. If you buy a property which is dilapidated and it is unlettable, then say for 6 months you are renovating it to a lettable standard, then I would consider the interest payable on the mortgage to be a capital cost and therefore allowable as part of the CGT computation on disposal. This is becuase the property is not reasonably part of the letting business until it is in a lettable state. ***** however, see below. If you buy a property in need of a bit of renovation, ie. it is lettable, and you are smartening it up for letting, and a couple of months down the line it is let, then I would argue that the mortgage interest is allowable on the basis that the property was part of your letting business from the start. I had assumed that this was what Matt was talking about. *****HOWEVER, for a 'multiple property letting business' ie. someone like yourself Simon, then I would allow the mortgage interest against your letting business, not as a capital cost - providing that your borrowings did not exceed the initial value - ie. most BTL's are mortgaged 75 - 80%, therefore someone with 30 properties is likely to have enough initial equity in other properties to cover the mortgage on this one (for example, 30 properties, bought at £100k each, therefore mortgaged 80%, would mean that the mortgage on the 'property in question' could arguably be soaked up by the 20% 'initial equity' in the rest of the portfolio). It would therefore only seem to hurt those with smaller portfolios! Hope this clarifies Regards Sherena Link to comment Share on other sites More sharing options...
Simon Dewsberry Posted October 10, 2007 Report Share Posted October 10, 2007 Hi Sherena Thank you ..that will do me ! Pulse rate restored.. Simon Link to comment Share on other sites More sharing options...
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