Property matters

A limited company client exchanged contracts to purchase a new block of apartments and paid a deposit to the builder. On completion the director of the company and a couple of other individuals obtained buy to let mortgages and purchased the apartments holding them on trust for the company. The individuals did not advise the lenders of the trust agreements and the director states that loans were obtained in this manner as individuals can get better rates of interest and larger loans. The trust deed confirms that the company will collect the rental income and indemnifies the relevant individuals for any expenses incurred on the properties and will be responsible for payment of the mortgage interest. The company has been collecting the rents and paying the loan interests.

Our concern is that HMRC will deny tax relief to the company on the loan interest as the loans...