Hi,
According to the notes interest on a loan to purchase the property is an allowable deduction when calculating property business profit. However, according to the question in June 2010 Mice Ltd, it states that interest paid in respect of a loan to purchase property is set off under the loan relationship rules and is not deducted as an expense from property income. Which is correct please?
Thanks!
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Interest on a loan to purchase the property
You are mixing up the corporation tax and income tax rules! When a company pays interest on a non trading loan, such as on a rental property the interest payable is indeed deducted under the loan relationship rules from interest income. If an individual pays interest on a loan taken out to purchase a rental property this will instead be deducted from rental income!
Ok makes sense thank you!
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