HMRC confusion – Is BTL a commercial mortgage?

by Readers Question

8:01 AM, 5th January 2018
About 3 years ago

HMRC confusion – Is BTL a commercial mortgage?

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HMRC confusion – Is BTL a commercial mortgage?

I have just been on the HMRC webinar for Income from property and they have said that commercial mortgages will be exempt from interest relief changes that are getting phased in from 2017-2018 tax year.

Is a BTL mortgage classed as a commercial mortgage? as I was under the impression that they are not regulated under the FCA.

I asked the question in the chat box and was told to refer to my lender.

Many thanks


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Neil Patterson

8:10 AM, 5th January 2018
About 3 years ago

Hi Mark,

Under the FCA Buy to Let is classified as a commercial loan and not fully regulated with regards to fact finding, suitability letters and whole of market searches or require qualified advice.

This is because it is deemed the borrower is more informed and does not require the same consumer protection. There are regulated BTLs but this is more niche where the original purchase of the loan was not for the intention of investment or was for close family members.

However all BTL loans for residential property (not holiday lets) fall under section 24 mortgage interest relief restrictions.

The distinction HMRC failed to point out to you is that if you purchase a commercial property (not residential) such as a shop or office with a pure commercial mortgage then this does not fall under section 24.

I hope that helps a little.

Denise G

9:11 AM, 5th January 2018
About 3 years ago

So it's the usual 'heads we win, tails you lose' scenario Mark


16:41 PM, 5th January 2018
About 3 years ago

No it isn't, either by lenders or HMRC - a commercial mortgage is one you might use to buy a guest house and it is much more onerous in its lending criteria. You have to supply quarterly accounts, business plan etc.

Gunga Din

19:06 PM, 5th January 2018
About 3 years ago

One of mine is a shop with two flats above. Would HMRC class this as a commercial mortgage? I seem to recall the lender did.


19:28 PM, 5th January 2018
About 3 years ago

Thanks for the replies so far

Puzzler - Its ironic that they wanted to introduce quarterly accounts for HMRC tax returns and also under PRA new regulations a 'portfolio landlord' can be asked to produce a business plan.

Mark Alexander

20:43 PM, 5th January 2018
About 3 years ago

There is no legal definition of a commercial mortgage that I am aware of.

I am quite certain that HMRC would have been referring to mortgages secured against commercial property as opposed to residential property.


8:06 AM, 6th January 2018
About 3 years ago

"A commercial mortgage is a mortgage loan secured by commercial property, such as an office building, shopping center, industrial warehouse, or apartment complex. The proceeds from a commercial mortgage are typically used to acquire, refinance, or redevelop commercial property." - for example, HSBC will not lend on residential property if you will have more than four mortgages unless it goes to a minimum loan of greater than £1.5 million for a development. Also a commercial mortgage will only be lent on a capital repayment basis. They also lend on e.g. guest houses, hotels and B&Bs as these are trading premises. Not a legal definition but the banks have pretty strict definitions.

paul thomason

9:13 AM, 6th January 2018
About 3 years ago

Reply to the comment left by Puzzler at 05/01/2018 - 16:41
there are many lenders who do intrest only morgages for first 10 years , i have one on a shop and am doing another intrest only on another

Gunga Din

10:16 AM, 6th January 2018
About 3 years ago

With my 1/3 commercial, 2/3 residential (flats above a shop), on a capital repay mortgage, I wonder whether my accountant can apply the section 24 rule to only 2/3 of the interest payments?

money manager

11:29 AM, 6th January 2018
About 3 years ago

Solution, raise or increase to the maximum a commercial loan on eligible but unencumbered property and pay of the S24 afflicted debt, simple debt replacement, just the same has you might with rate management.

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