Can you only claim relief on mortgage interest for the periods that the property is let (i.e., not the periods it is vacant)? Also, if you have to pay into an annual reserve fund, is this an expense that’s tax deductible? 

Arthur Weller replies:  

If you look at HMRC’s Property Income Manual at PIM2052 (tinyurl.cm/PIM-2052), it states: "[The interest is allowable] if the customer is genuinely trying to let the property but it is empty because they have not been able to find a tenant. In this case, the interest will meet the ‘wholly and exclusively’ test. It won’t meet this test if they have not been trying to let the property or they have been using it for private or non-business purposes." In HMRC’s Property Income Manual at PIM2040 (tinyurl.com/HMRC-pim2040), it implies that where a tenant is required to make payments for work to maintain or repair leased premises which the lease does not require the tenant to carry out, this is classified as the tenant paying rent.