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Property refinance costs - what is the tax position?

Question How are property refinance costs treated for tax purposes? Specifically, legal fees, search fees and new lender’s fees. On the original purchase of course all these costs are not allowable for current income purposes, but form part of any eventual capital gains computation.

Arthur Weller replies:
On original purchase legal fees, search fees and other fees relating to the purchase are classified as capital expenditure - see www.hmrc.gov.uk/manuals/pimmanual/PIM2205.htm. But fees relating to obtaining loan finance are allowable revenue expenses - see www.hmrc.gov.uk/manuals/pimmanual/PIM2066.htm. If the refinance simply replaces and stands in the shoes of the original finance, then the refinance fees should also be allowed, like the original.


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