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Is interest still eligible for tax relief after the asset has been scrapped?
In 2004 my client (and cycling companion) took out an interest-only mortgage to acquire his main residence. In 2006 he added a sub-account to this mortgage for a further £15 000 of borrowings to acquire a car that is used 25% for business.
This new borrowing was also interest-only but at a slightly lower rate than the original mortgage. Since then 25% of the interest charged on the borrowings for the car have been claimed on the tax return as an allowable expense.
The client has recently started to make small repayments of mortgage capital but because of the rate differential he is paying the house part of the borrowings first. His current plan envisages 15 to 20 more years before he repays the capital on the car element of the borrowings.
However the car was scrapped in 2013/14 and the client now...
