Reply to: Property let. interest claim.

[TheCyclingProgrammer]

Not sure how this would hang with HMRC but would be cheaper to take a £38k DLA at 4%, repay the mortgage and repay MyCo over over the next 18 months.

Any ideas accountants?

All of the accountants on here will rightly advise caution.

HMRC won't mind as long as the loan is taken legally, you pay the right amount of interest and pay your tax bills on time (including any s455 charge if you don't pay the loan back in time).

Timing is key, the closer you can do it to the beginning of your company a financial year, the more time you have to pay off the loan.

This was all discussed in a recent loan thread but you should only even consider this if your company has ample reserve funds, it's not going to affect its ability to meet its liabilities and you are confident you can pay it back in time.

You'll also need to document the loan and get written shareholders approval for a loan of that amount.

You need to be sure of what you're doing and run it past your own accountant who will be in a lot better position to say whether or not this would be a wise move for your circumstances.

[ASB]

Not sure how this would hang with HMRC but would be cheaper to take a £38k DLA at 4%, repay the mortgage and repay MyCo over over the next 18 months.

Any ideas accountants?

Dont know how the cost would work out compared with your deal, but you could do that.

Also you can still claim the loan interest as an expense, it does not need to be a formal mortgage on the property. A quick search should turn up plenty of information on that subject.

If the rate is unreasonably high it will cause an issue.

Edit:-

Here is one link which may help a bit. http://www.accountingweb.co.uk/anyan...-was-taken-out

The key point is: "It matters not which property the loan is secured on - or indeed whether the security were on the private residence and not on the let properties. It would be clear that £100k has been used to finance the letting business and that is all that is required."

I'm not saying it's without risk.

One comparatively common way of dealing with it is to take additional funds on the residential mortgage and use those. Of course caution is needed because you need to be able to show it. [fwiw in a previous rental business I took a loan on my residential mortgage, used the proceeds to buy a flat which was let and claimed the interest. I did get an aspect enquiry and they closed it quite quickly having demonstrated the paper trail].

But IAMNAA

[Scrag Meister]

Blimey. That bites. They all hint that there would be a change to a BTL rate but I have had consent for 3 properties over a longish time. Halifax just said OK, B&M asked me to fill a form in and said OK and RBS charged me 100 quid or so and said ok. Not one of them batted an eye or suggest a move to a BTL rate. Must have fallen unlucky with your choice of provider. V frustrating as you say.

Not sure how this would hang with HMRC but would be cheaper to take a £38k DLA at 4%, repay the mortgage and repay MyCo over over the next 18 months.

Any ideas accountants?

[northernladuk]

It varies. But that seems to be a common price for CTL. It's about the same rates as a BTL would be if on a decent residential deal. Also BTL product fees seems high in general. It's hard to find tracers below about 4% with about 2k fees.

Hence my reluctance to remortgage. 2.39% gross with effective 40% discount as a 40% taxpayer. Best "simple" deal I can find was 2k fees and 3.49%. I'm sure with a bit of shopping around I could probably find 3.5% with no fees.

Interesting. Thanks.

[ASB]

Blimey. Didn't know that. And is that a 3% loading on top of whatever rate you have or does it vary depending on your existing rate to bring you in line with their existing BTL offerings? Surely they won't over penalise you for wanting to start letting?

It varies. But that seems to be a common price for CTL. It's about the same rates as a BTL would be if on a decent residential deal. Also BTL product fees seems high in general. It's hard to find tracers below about 4% with about 2k fees.

Hence my reluctance to remortgage. 2.39% gross with effective 40% discount as a 40% taxpayer. Best "simple" deal I can find was 2k fees and 3.49%. I'm sure with a bit of shopping around I could probably find 3.5% with no fees.

There are also lenders which will load higher if they catch you out.

Going back to my situation. Fsk 'em. They basically don't give to CTL and also don't do BTL. So their point (on discovery) is "pay off the loan".

After speaking to solicitor his view was "of course I couldn't recommend that; but there is no question of anything worse than having to pay off the loan. Having also reviewed the mortgage deed this is a contractual condition for a breach of conditions. There is also no specific prohibition on let, however I will have to further review the original terms and conditions which formed part of the offer. Realistically it is highly improbable there is no prohibition on letting".

It so happens that the loan is offset, and also that I have liquidated some of my stock portfolio. When this is settled it will find its way into the current offset and effectively reduce it to pocket change anyway.

Of course this means that a much higher portion of the rent will be profit which will lead to higher taxes at 40%. So there is a filthy scumbag tax avoiding question on its way about tenants in common in varying percentages and profit distribution from their joint property, by some amazing coincidence the other TIC is my partner unmarried, with 20%. Now if it just happened she could be assigned all the income outwith the settlements rules that would be very useful. More research and separate thread to follow....

[northernladuk]

Nope, SM is not unlucky. That is about the reality - certainly for anything over about 12 months intended let. 3% is about the top end of the loading from what I have read.

Like you my previous forays pre crunch were not problem at all. Can;t recall ever paying anything.

Blimey. Didn't know that. And is that a 3% loading on top of whatever rate you have or does it vary depending on your existing rate to bring you in line with their existing BTL offerings? Surely they won't over penalise you for wanting to start letting?

[ASB]

Blimey. That bites. They all hint that there would be a change to a BTL rate but I have had consent for 3 properties over a longish time. Halifax just said OK, B&M asked me to fill a form in and said OK and RBS charged me 100 quid or so and said ok. Not one of them batted an eye or suggest a move to a BTL rate. Must have fallen unlucky with your choice of provider. V frustrating as you say.

Nope, SM is not unlucky. That is about the reality - certainly for anything over about 12 months intended let. 3% is about the top end of the loading from what I have read.

Like you my previous forays pre crunch were not problem at all. Can;t recall ever paying anything.

[northernladuk]

I am in the process of letting my house in Devon, and the mortgage provider doesn't give consent to let except if I transition to a BTL mortgage with the relevant 3% rate increase.

Only planning to have the mortgage on that place for a further 18 months or so, therefore not a big deal in the long term, just a little frustrating over the next few months.

Blimey. That bites. They all hint that there would be a change to a BTL rate but I have had consent for 3 properties over a longish time. Halifax just said OK, B&M asked me to fill a form in and said OK and RBS charged me 100 quid or so and said ok. Not one of them batted an eye or suggest a move to a BTL rate. Must have fallen unlucky with your choice of provider. V frustrating as you say.

[Scrag Meister]

Lenders crack down on 'accidental' landlords

Although saying that there are millions of people asking what they should do. Can't find any evidence of the worst case happening.

I don't think you will have any problems with a consent to let. Might cost you about 120 quid though.

I am in the process of letting my house in Devon, and the mortgage provider doesn't give consent to let except if I transition to a BTL mortgage with the relevant 3% rate increase.

Only planning to have the mortgage on that place for a further 18 months or so, therefore not a big deal in the long term, just a little frustrating over the next few months.

[northernladuk]

Just burn it down and claim on the insurances. Much simpler.

[ASB]

It also worth bearing in mind that, if you are caught defrauding your mortgage co., this could materially impact your chances of getting a mortgage in future (and possibly have other implications). In my understanding, this info. would be available to other providers. There may be a lot of people doing this in practice, but it isn't without risks.... personally, I'd check with the mortgage co about consent to let and, if they don't provide it, go with a BTL elsewhere - as you said yourself the outstanding mortgage amount is small, so the difference in interest payments should be small too.

In those circumstances I would be inclined to simply pay it off anyway. Best btl rates are approx 2 times what im paying. But I do have quite a large line of credit at 1.4% on a different property. I could use this, pay off the mortgage and also claim the interest since the funds are being used in the property business.

this gives a complication though. This raise would be with my partner. That may have a silver lining though. If we became tenants in common on the property I currently own outright. Which would need me to execute a deed of trust then the income is legitimately split. She then pays @ 20 on her share and me at 40.

May be worth exploring.

[ASB]

Um, because you seem happy to breach the terms of your mortgage agreement.....

But apart from that willingness to defraud your mortgage provider, yep its a bit unfair to assume that someone willing to break the law in some way is willing to break the law in other ways..

Fair comment. Though what I have in fact done is intimated I might.

I have now reviewed the mortgage deed and bizarrely it is completely silent on letting.

in any event breaching the conditions, if I do so, is not fraud. It is a civil matter. There is specific contractural redress for acting outwith the terms. It is not a breach.

[jamesbrown]

It also worth bearing in mind that, if you are caught defrauding your mortgage co., this could materially impact your chances of getting a mortgage in future (and possibly have other implications). In my understanding, this info. would be available to other providers. There may be a lot of people doing this in practice, but it isn't without risks.... personally, I'd check with the mortgage co about consent to let and, if they don't provide it, go with a BTL elsewhere - as you said yourself the outstanding mortgage amount is small, so the difference in interest payments should be small too.

[eek]

Well then, its a good job that the income will be appropriately declared and the tax paid.

cant imagine what gave you the idea I am planning to hide anything from hmrc.

Um, because you seem happy to breach the terms of your mortgage agreement.....

But apart from that willingness to defraud your mortgage provider, yep its a bit unfair to assume that someone willing to break the law in some way is willing to break the law in other ways..

[ASB]

You really should find someone and get advice then. HMRC are starting to like amateur landlords, they are easy targets with assets that can be liquidated to enforce payment.

Well then, its a good job that the income will be appropriately declared and the tax paid.

cant imagine what gave you the idea I am planning to hide anything from hmrc.