![]() The lender is making an exempt supply of credit to the borrower and the consideration is the interest charged. The lender (or ‘mortgagee’) is not purchasing the property and there is no supply of a security by the borrower (or ‘mortgagor’) to the lender. Someone wishing to purchase property may obtain finance by taking out a mortgage loan, which is secured by means of a legal mortgage (commonly referred to as a legal charge) over the property. Interest paid on deposits with a bank or building society is also consideration for the making of an advance - the advance being made by the customer of the bank. An average cost of the lender’s legal fees would be around £850 + VAT for a property valued up to around £250K. Again, lenders pass on their legal fees to you. This charge is seen as consideration for the supply of credit, and thus is exempt under item 2. Plus the paperwork: bridging loans are recorded on the charges register for the property held at the land registry, so there are legal costs for doing that. ![]() For this facility the bank will normally charge the customer. Many banks and building societies allow their customers to go overdrawn on their bank accounts, in effect borrowing money using a loan on demand. Personal and cash loansĪs above, the consideration received for a personal or cash loan will be exempt, and does not include the amount of the capital loaned. ![]() These might represent consideration for the supply of the loan, advance or credit, but you should see VATFIN3125. Sometimes there is an arrangement fee or other type of fee charged. If the mortgage arrangement fee is for a new mortgage then you cant claim this as an expense. My accountant says this £2000 cannot be used for the finance related charges for the first let. There was a £2000 mortgage arrangement fee from the lender. (See VATFIN3120 for interest-free credit.) I converted my residential mortgage to a BTL mortgage in Oct 2022. Item 2 covers most of the normal types of credit transactions you are likely to encounter, for example, loans, overdrafts and other forms of advances.Ĭonsideration for an item 2 supply is whatever is received over and above the initial amount loaned, and is normally expressed as ‘interest’, but in certain circumstances it can be expressed in different terms.
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