Do mortgage product fees fall under Section 24?
I have had discussion with my new accountant in relation to Mortgage Product fees which had been incurred both during purchase and remortgage. My understanding is that, Mortgage Product fees forms part of phased Mortgage Interest Relief and should be input in same section on Tax return where you input your total Mortgage Interest costs under the section “Allowable Loan Interest and other financial costs” Accordingly my understanding is Mortgage products fees are equally impacted by section 24 as Mortgage Interest.
My accountant who seems to think that Mortgage product fees are not part of Section 24 and he argued that they should be placed under the section “Legal, management & other professional fees” Whilst I can understand that brokers fees and product fees should arguably fall under his understanding however I believe that they are part of section 24.
Any input will be greatly appreciated.
Simon
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Member Since January 2011 - Comments: 12212 - Articles: 1406
11:06 AM, 24th February 2020, About 6 years ago
The section 24 restrictions apply to all “FINANCE COSTS”.
Lenders arrangement fees are finance costs.
In other words, YOU are right and your accountant is wrong.
You may wish to share the HMRC rules with your accountant, which I have linked to below.
https://www.gov.uk/government/publications/restricting-finance-cost-relief-for-individual-landlords/restricting-finance-cost-relief-for-individual-landlords
Alternatively, you might consider engaging an accountant who actually understands property taxation!
The accountancy firm I recommend is Pacific Limited Chartered Accounts based in Norwich. Distance is not an issue with modern technology, bear in mind I live in Malta! I have been recommending them for over two decades and during that time I have introduced them to over 1,000 property investors. Accordingly, they specialise in property-based accounting and are experts in their field. They are a medium sized boutique accountancy firm and being based in provincial Norwich their pricing is very reasonable, especially when comparing them to the larger firms or London based practices. They certainly aren’t the cheapest, but they do provide excellent value for money, which is what is most important in my opinion. The best people to speak to in the first instance would be Neil Barlow or Graham Mitchell – Telephone 01603 630684.
Member Since September 2015 - Comments: 31
12:34 PM, 24th February 2020, About 6 years ago
Mark (and you) are correct here.
Think about it. If your accountant was right, lenders would just offer mortgage deals with insanely high fees and zero interest.
Member Since November 2016 - Comments: 335
9:40 PM, 24th February 2020, About 6 years ago
Reply to the comment left by Mark Alexander at 24/02/2020 – 11:06
Thanks Mark.
Member Since November 2016 - Comments: 335
9:41 PM, 24th February 2020, About 6 years ago
Reply to the comment left by Gary Bray at 24/02/2020 – 12:34
Thank you Gary.
Member Since January 2022 - Comments: 20
11:39 AM, 4th January 2022, About 4 years ago
HMRC guidance states that loan fees and any incidental costs in obtaining finance for a rental property are deductible. Isnt this what a product fee is?
PIM2105 – Deductions: main types of expense: fees for loan finance and similar items
Under sections 58 and 59 of the Income Tax (Trading and Other Income) Act 2005 (applied to property businesses by sections 272 and 272ZA), incidental costs incurred in obtaining loan finance for a rental business are generally deductible in computing rental business profits provided they relate wholly and exclusively to property let out on a commercial basis. These costs include loan fees, commissions, guarantee fees and fees in connection with the security of a loan.
https://www.gov.uk/hmrc-internal-manuals/property-income-manual/pim2105
Member Since October 2020 - Comments: 1172
1:57 PM, 4th January 2022, About 4 years ago
The question wasn’t whether they are tax deductible, but whether the deduction is limited by s24 to 20% (effectively).
Member Since March 2023 - Comments: 1
8:38 PM, 1st March 2023, About 3 years ago
Reply to the comment left by M K at 04/01/2022 – 11:39
I think this is for a property business, i.e. receive a rental income via company.
The S24 is applied to a rental income received by individual.
Member Since January 2011 - Comments: 12212 - Articles: 1406
1:23 PM, 2nd March 2023, About 3 years ago
Section 24 restrictions on finance cost relief are applied to all finance costs including arrangement fees.