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Can my client re-arrange his affairs to offset interest?


I would be grateful to receive your view on whether interest relief can be claimed in the following scenario:-

The client:
a) owns a PPR valued at £900k with a mortgage secured on it of £400k
b) subsequently acquires a buy-to let property purchased for £450k with a mortgage of £200k secured, using savings to fund the deposit

Without actually remortgaging or physically transferring money, is the client allowed to ‘re-arrange his affairs’ by deeming that £60,000 of the existing mortgage secured on the PPR is funding/replacing the deposit on the letting property and hence claim a tax deduction in his Sch A comp for the interest on the £60,000?

I should be interested in your thoughts on this.

Arthur says:
The interest is not allowable. The loan was originally taken out for the purpose of purchasing the PPR, and it is not possible to 're arrange matters'.

The taxpayer would have to physically transfer money, or actually remortgage.

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