Inherited investment property

The query published in Taxation 19 April 2001 at page 76 concerned the possibilities for obtaining mortgage interest relief by transferring a mortgage onto a recently inherited property which the client intends to let.

The suggestion included in the replies to this query involves the wife taking out a mortgage to purchase the newly inherited property owned by her husband so that he can repay the existing mortgage over the matrimonial home. This will probably impress the client no end. However such an arrangement has to be vulnerable to attack under section 787 Taxes Act 1988 (anti-avoidance: arrangement to secure interest relief) not to mention Furniss v Dawson. It would take some hard and fast talking to be able to persuade any Inspector worth his salt that this was not an artificial scheme designed to do exactly what is asked in the question...