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Posted Thu, 04 Jan 2024 08:50:40 GMT by
Hi I've seen contradictory advice online about how to reflect various costs incurred in remortgaging a rental property in this tax year. I am trying to find out if any of the below expenses are 'allowable expenses' and therefore entitled to full higher rate 40% relief, or if they are treated the same as mortgage interest, in which case they only receive the basic rate 20% relief. The expenses are: A £1749 application fee for the remortgage A £225 account fee for the mortgage (which is payable when the mortgage account is closed in the future) C.£2500 legal fees for processing the remortgage including Land Registry fees C. £1200 early repayment charge on previous mortgage on rental property for closing that account within the last 12 months of its fixed term Many thanks.
Posted Fri, 05 Jan 2024 15:46:08 GMT by HMRC Admin 2

Incidental costs incurred in obtaining loan finance for a rental business are generally deductible when calculating rental business profits provided that they relate wholly and exclusively to rental business commercial lettings as covered by PIM2105 and BIM45815 which includes the application fees, account fees and legal fees including land registry fees.

PIM2105 - Deductions: main types of expense: fees for loan finance and similar items
BIM45815 - Specific deductions - incidental costs of loan finance: expenses allowable

Early repayment charges, also known as an early break charges, are covered within BIM45820

BIM45820 - Specific deductions - incidental costs of loan finance: exclusions from relief

This guidance implies that whether they are classed as incidental costs will depend on the facts of the particular agreement. If such charges amount to a premium, they are expressly disallowed as an expense.

Thank you.

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