Deducting interest on someone else’s mortgage?

Deducting interest on someone else’s mortgage?

7:09 AM, 23rd April 2021, About 2 years ago 6

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Is it illegal to deduct mortgage interest on someone else’s mortgage, or have I been badly advised? An experienced and mature tax adviser suggested that my unmarried partner should gift me 1% ownership of her HMO into a bare trust, in order that I may legitimately deduct all the interest on the HMO’s mortgage with no SDLT on the 1% gift.

We jointly run a small portfolio, with some houses owned in her name and others jointly. The HMO was bought in her name only, and remains solely in her name at the Land Registry; the HMO mortgage is solely in her name too. All the HMO’s revenue accrues to me.

I was advised that the 1% bare trust gave me the basis for deducting 100% of the mortgage interest.

Is this legit? Aggressive tax tactics are not our style, but our adviser assured us it was an established move. We’ve done it for 5+ years. I worry that HMRC might disagree. If they did, presumably the penalty rises as time goes by.

I’d be grateful if any suitably qualified readers on here would give their view. If it’s not legit, what next?


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paul kaye

17:12 PM, 23rd April 2021, About 2 years ago

your adviser would be liable and should carry insurance to that fact !


19:49 PM, 23rd April 2021, About 2 years ago

Why is your partner not claiming the deduction themselves? And why are you taking the revenue if it's their property?

St. Jims

7:37 AM, 24th April 2021, About 2 years ago

Reply to the comment left by Puzzler at 23/04/2021 - 19:49
Out of the two of us, she was the higher rate tax payer at the time the advice was given, and I was the lower rate.

St. Jims

7:47 AM, 24th April 2021, About 2 years ago

Reply to the comment left by paul kaye at 23/04/2021 - 17:12
Thanks for your input Paul. You might be right, but may I ask if you're a tax advisor or in a related profession? I ask only to help me qualify your input, rather than question it.

Seething Landlord

9:21 AM, 24th April 2021, About 2 years ago

It sounds to me as though you and your partner need a complete overhaul of the structure of your business by somebody who is in possession of all the relevant information, rather than just the few random details that you have mentioned so far.

Nick Price

14:38 PM, 1st May 2021, About 2 years ago

He's right. You can only deduct mortgage interest if you are on the mortgage. You can split shares by trust deed. If you want to deduct mortgage interest you need to do a transfer of equity and remortgage.

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