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Quick Capital Expense Question!


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Hi all,

Just a few questions on capital expenses, conveyancing fees are typically capital. So held on the balance sheet until it can be offset against any CGT from the sale of the property to which it relates. So would I just journal this to a long term fixed asset account and let it sit?

DR Fixed Asset "Capitalized Property Costs"
CR Bank

Next would be mortgage product fees (sometimes called arrangement fees) I've read on this forum these can be expended immediately even if they are added to the mortgage amount and interest is paid on the amount. So at 1% of a mortgage of £150,000 the accounting would be:

DR Expense 1,500
CR Mortgage Liability Account 151,500
DR Property Fixed Asset

Does this look right?

Finally mortgage application fee, some banks ask for a fee to even apply for a mortgage (Paragon). I'm not really sure if this is capital or expense but I would lean expense if mortgage product fees are expensed then this surely would be to?

Thanks in advance,

Seb

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6 hours ago, seb1uk said:

conveyancing fees are typically capital. So held on the balance sheet until it can be offset against any CGT from the sale of the property to which it relates.

In effect added to the value of the property, no tax relief until you come to sell the property when the purchasing costs can be used to reduce the amount of corporation tax or capital gains tax you pay, depending on the structure you have (I assume limited company? if so corporation tax).

You can ask your solicitor to split conveyancing fees and break them down to the part that is linked to acting on your behalf when making the purchase (capital) and the part linked to arranging finance (assuming they are also acting for the lender) You can then treat this part as revenue. Depending on your solicitor it might be more trouble than it is worth to try and get them to do this for you by the time you have explained it.

6 hours ago, seb1uk said:

mortgage product fees (sometimes called arrangement fees) I've read on this forum these can be expended immediately even if they are added to the mortgage amount and interest is paid on the amount.

Yes assuming you are investing through a limited company. If sole trader you can only get a basic rate relief for finance costs. Depending on your accounting policies you would also need to decide whether to expense all in first year or over the life of the mortgage/initial term.

6 hours ago, seb1uk said:

mortgage application fee, some banks ask for a fee to even apply for a mortgage (Paragon). I'm not really sure if this is capital or expense but I would lean expense if mortgage product fees are expensed then this surely would be to?

As above costs of finance are allowable expense for limited companies but note the point above if sole trader.

 

 

 

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David M Slater ACMA 
Accufy Accounting
01946 552801
  david@accufy.uk
  www.accufy.uk
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