Offset Mortgages

[northernladuk]

It appears that a mortgage provider does allow company funds to be offset - see Offset Mortgage | Commercial Lending | Norwich and Peterborough Building Society for more details. Having had a quick look at the application form no restriction appears to be placed on Ltds (which would interest a lot of people here) and assuming you have a decent set of records (>2/3 years) then you might be onto a winner. No idea whether this could be legitimately used for a personal purchase.

But there are restrictions. First off only 30% of the mortgage is offset and secondly this bit..

Then every month, we take into account the balances held in your N&P Offset Savings or Business Gold Current Account (or both) when calculating the amount of interest we charge you on your mortgage.

[Wanderer]

It appears that a mortgage provider does allow company funds to be offset - see Offset Mortgage | Commercial Lending | Norwich and Peterborough Building Society for more details.

Sounds like an interesting product.

Would this result in a BIK charge on the person with the mortgage though?

[THEPUMA]

NatWest used to do a product where you could offset a business account against a personal mortgage but it only applied to sole-traders or partnerships. I suspect this may be the same but it would be worth calling them to check.

[northernladuk]

Sounds like an interesting product.

Would this result in a BIK charge on the person with the mortgage though?

I would have thought so in theory but if they just use the money in the business account you set up with them and don't move it out I don't think it would show anywhere so nothing to declare? Would only be if you had to move it out of LTD account I would have thought. This product says it will count the business account so wooden money kind of thing.

[FarmerPalmer]

It appears that a mortgage provider does allow company funds to be offset - see Offset Mortgage | Commercial Lending | Norwich and Peterborough Building Society for more details. Having had a quick look at the application form no restriction appears to be placed on Ltds (which would interest a lot of people here) and assuming you have a decent set of records (>2/3 years) then you might be onto a winner.

Edit - almost certainly cannot be applied to personal purchases.

That is a commercial mortgage, and it is right for a business to be able to offset its assets against its liabilities, as can be done in personal offset mortgages.

The only way that I can see an owner of a limited company using its assets to offset against a personal mortgage, is if the director used a directors loan to borrow the money from the business to offset against their personal mortgage, repaying that loan as and when appropriate in accordance with the rules, and reborrowing when allowable / appropriate again. Could this be the method used?

[northernladuk]

That is a commercial mortgage, and it is right for a business to be able to offset its assets against its liabilities, as can be done in personal offset mortgages.

The only way that I can see an owner of a limited company using its assets to offset against a personal mortgage, is if the director used a directors loan to borrow the money from the business to offset against their personal mortgage, repaying that loan as and when appropriate in accordance with the rules, and reborrowing when allowable / appropriate again. Could this be the method used?

I can't see how that would benefit you. You would have to pay BIK on the savings reaslised and interest to the business for the loan plus a lump sum a year etc... Loads of threads about taking money out of LTD to prop up mortgages if you do a search. It isn't worth doing that way.

[Wanderer]

That is a commercial mortgage, and it is right for a business to be able to offset its assets against its liabilities, as can be done in personal offset mortgages.

Hmm, not quite the holy grail we seek then.

If some lender did offer a product like this then it would be very popular. Aside from the usual VAT and CT cash at hand, a wealthy business person could retain substantial cash reserves in their LTD company to avoid higher rate tax liabilities but still use the money to offset their mortgage debt, perhaps indefinitely.

I wouldn't be surprised if there is a HMRC rule regarding the company acting as a guarantor or underwriting loans taken out by the director which catch this case and make it unattractive, otherwise every bank on the high street would be offering a product like this...

[Greg@CapitalCity]

You know, there was a recent case on this. It centered around the Director holding his company funds in his personal account 'on trust' - that is, the money was NOT loaned to him, but rather he just happened to be holding onto it. Turned out that he used the funds for personal purposes, including putting a chunk into his personal offset mortgage account - the HMRC didn't like it, and he got clobbered.

Interestingly, it seems if he had the right paperwork in place, and put his company funds into a 'high interest' personal savings account (that did nothing other than hold his company money), he would have been OK.

There's a bit more on it here;
Gabelle Tax Analysis: The dangers of mixing corporate and personal funds | AccountingWEB

[northernladuk]

You know, there was a recent case on this. It centered around the Director holding his company funds in his personal account 'on trust' - that is, the money was NOT loaned to him, but rather he just happened to be holding onto it. Turned out that he used the funds for personal purposes, including putting a chunk into his personal offset mortgage account - the HMRC didn't like it, and he got clobbered.

Interestingly, it seems if he had the right paperwork in place, and put his company funds into a 'high interest' personal savings account (that did nothing other than hold his company money), he would have been OK.

There's a bit more on it here;
Gabelle Tax Analysis: The dangers of mixing corporate and personal funds | AccountingWEB

Great find. ThePuma mentioned the option of putting money in trust to use against mortgages but didn't have an history to say whether this would work or not and it looks like that option is out now. The option to put it in a high interest account is still there but obviously seems to be pushing the boundries to far (for the actual gains with interest at the level it is).

[LatteLiberal]

You can just take all of you cash and stick it into a savings account and do this, as long as you pay it back within the given time period.