What is the true cost?

Bill Dodwell considers what the Hargreaves Lansdown case means for the tax treatment of costs

One of the wider issues in taxation is the extent to which costs may be deducted from investment income and gains. The answer, of course, is that it all depends…

The decision by then Chancellor George Osborne to limit interest deductions against income from residential rental property was criticised by many, on the basis that borrowing costs were part of the costs of buy-to-let properties. However, other forms of investment don’t qualify for interest relief and so the logic of allowing interest against one category but not another remains unclear. If tax policy isn’t intended to interfere with economics, then the case for any form of interest deduction is questionable.