Mortgage on investment property to pay tax bill

If you come to us asking for one type of property finance, that doesn't mean we won't propose an alternative solution if it could work better for you. 

The Scenario

This is the nightmare scenario no-one want to find themselves in.

Bad advice from an accountant lands you with a belated £250K tax bill. And months of legal wrangling rack up a further £40K in legal fees. (Because no-one’s going to hand over a quarter of a million quid to HMRC without putting up a fight.)

Our professional landlord client came to us with a payment deadline now only four weeks away.

The limited company the tax was charged against had been liquidated.  

The asset he could raise funds against was held by another limited company: an unencumbered semi-commercial property in Swansea (ground-floor restaurant with flats on the 1^st and 2^nd floors above), valued at £550K.

He came to us with 3-4 weeks to pay HMRC, looking for bridging finance secured against the investment property, to be repaid by a mortgage.

The Solution

At last some good news for the client.

As soon as we presented him with some indicative loan terms and got discussions underway, HMRC had confidence that he was actively pursuing finance and came back with a deadline extension.

Now with three months before payment was due, we changed tack to source a mortgage straight away, bypassing bridge finance.

For many potential lenders a company liquidation in the background, and funds being used to pay a tax bill, are red flags. They could indicate a client who’s sailing close to the wind.

We identified a lender who was prepared to consider this use for the funds, presenting our client to them as the victim of poor advice rather than a willful tax-avoider.

The rate offered wasn’t rock-bottom, because of the limited field of lenders, but our client was very happy with the 20-year mortgage term, and the finance was in place for him in plenty of time to meet the tax payment date.

Read our blog about business loan finance »