Ray Drake

HMRC’s BIM45700 at example 2 states that loan finance taken out can be used for any purpose whatsoever if it is providing funding to replace funding provided by the letting business owner’s capital account, provided that their capital account in the business remains in credit. It is a well-established principle that the loan, to be an eligible loan in the letting business, need not be secured on the property that is let out. Example 2 referred to above indicates that HMRC has confirmed that a mortgage taken out that generates funds that the proprietor can remove and use for whatever purpose that he desires is an eligible loan for the letting business provided that his capital account remains in credit, which by extension would indicate that funds raised by a mortgage on the proprietor’s main residence (that is not itself part of the letting business) in an otherwise identical scenario would similarly qualify as related to the letting business provided that the capital account remains in credit. Please confirm that this understanding is correct.