Question:
I purchased a flat for £98,000, and sold it for £122,500. During this time, I remortgaged once and incurred an arrangement fee of £795 and solicitor expenses. I also sold and activated an early redemption penalty in the region of £800. Are these expenses deductible from either my capital gains tax liability or end of year self-assessment?
Arthur Weller replies:
If you look at www.gov.uk/hmrc-internal-manuals/property-income-manual/pim2066 you can see that fees incurred in obtaining loan finance can be offset against rental income as an allowable revenue expense. So if you rented out your property, you should claim these expenses against your rental income. If you look at www.gov.uk/hmrc-internal-manuals/corporate-finance-manual/cfm33060 (albeit in the context of companies) you can see that early redemption penalties are an allowable expense, but it is also true to say that what is allowable under the corporation tax loan relationship rules for companies may be different.
