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Loan restructuring

Tax relief for the payment of mortgage interest was generally abolished from April 6, 2000.

However, for anyone running their own business where they have credit balance loan or capital or current accounts, it will be worth investigating whether it is poss-ible to release funds from the business to repay those outstanding accounts to facilitate repayment of a mortgage, the interest on which no longer qualifies for relief.

If the business subsequently needs money, then any interest payable on any fresh borrowing that may be required for business purposes and which may only, in effect, replace previous borrowing, would usually qualify for tax relief.

There is an anti-avoidance provision in the shape of section 787 ICTA 1988 but it would seem that this is rarely, if ever, applied in this context. That is not to say that it would not be, though.

However, provided that no increase in interest rate results from the restructuring, there should be no loss even if interest relief is denied.

It is essential that the taxpayer&#39s accountant is fully engaged in and consulted on this process before any of the suggested processes are carried out.

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