I am planning to take a drawdown on two of my properties and hold the money for a short time until I find another property to buy. As I intend reinvesting the drawdown money as a deposit on another property can I claim tax relief on all the interest paid on the new mortgages of the original properties.

Arthur Says

If it is clear that the money was borrowed in order to purchase the new property, then all the interest on the new loan is allowable.

The Inland Revenue may challenge the taxpayer, and ask them to prove that the purpose of the loan was for the requirements of their property business.

If the taxpayer can show that the loan was taken out only a short time before being reinvested, and the taxpayer did not use the money for any other purpose during the time between borrowing and reinvesting, then they should be OK.

Even if the intervening time period is not so short, but the taxpayer can show that they were actively looking for another property to invest in, and they needed the money immediately available just in case the opportunity for a cash purchase came their way, then this would also be a reasonable argument.