Question:
I have to complete on a 'off plan' property sooner than expected. I am planning to raise a mortgage on my main residence (currently unencumbered) for the sole purpose of raising cash to pay the balance on the 'off plan' property, the main reasons being to take advantage of the lower domestic mortgage interest rate and I do need a larger mortgage than I can raise on the 'off plan' at the moment.
I am getting differing opinions as to whether the mortgage payments to my 'main residence' will be an allowable expense against the 'off plan'
Arthur Weller Replies:
I presume that when completed the 'off plan' property will be rented out and your question is whether the interest payments can be offset against the rental income. If this is the case then the answer is that they can. Since the borrowing is in order to enable you to buy the property, the interest payments are an allowable expense - as can be seen on page PIM2105
(www.hmrc.gov.uk/manuals/pimmanual/pim2105.htm) of HMRC’s Property Income Manual. It doesn't make a difference that the mortgage is raised against your main residence. This can be seen on page BIM45685
(www.hmrc.gov.uk/manuals/bimmanual/bim45685.htm) of HMRC’s Business Income Manual.
