A man, together with his spouse, buys a house in 2015. They take out a mortgage for this from a bank. It is an annuity loan with a 30-year term. In 2019, the man decides to repay part of the mortgage. To do so, he takes out a new loan with his own limited company. This loan has a contractual term of 30 years. At the end of that year, the debt with the bank is significantly reduced. In 2020, he continues repaying the mortgage and takes out another loan with his PLC. This loan also has a 30-year term. This further reduces the debt with the bank. In January 2022, he repays both loans with his PLC in full.
The inspector found that the loans with the bv did not meet the conditions of an owner-occupied home debt. The bv's loans do not take into account the already expired maturity of the original loan. As a result, the maturities exceed the statutory maximum of 360 months for deduction. As a result, the man is not allowed to deduct the interest on both loans. The man objects to the adjustments. He points out that he repaid both loans in full in 2022, well before the expiry of the 360-month maximum term. He argues that this actual repayment ensures that the loans do not actually exceed the maximum term, which he says should be sufficient to qualify them as owner-occupied housing debt.
The court stressed that, based on the agreements entered into, the loans did not meet the repayment requirement and therefore did not fit within the legal framework. The contractual obligation is leading in determining whether a loan qualifies as owner-occupied housing debt. The fact that the husband repaid the loans in full well within the 360 months plays no role in this assessment. The law only looks at the contractually agreed term. The fact that actual repayments were made earlier is irrelevant for this purpose.