Upper Tribunal Tax and Chancery Chamber

[2025] UKUT 00185 (TCC)

Fecha: 09-Abr-2025

PBTL classification

PBTL classification

143.

The second agenda item was “Professional Buy-To-Let Classification”. A paper had similarly been circulated in advance, which included the following:

(1)

Finance have been applying a 35% risk weighting to all PBTL portfolios on T24 and Pepper, and also those acquired in the “London” and “Canberra” deals.

(2)

The PRA’s guidance states that 35% is required for owner occupied residential property and “certain Buy to Let” properties.

(3)

There was no further explanation of what was meant by “certain BTL” but “while there is nothing to stop us including for example multifamily or HMO properties, we have good reason to believe that this is not within the spirit of what the PRA intended”.

(4)

Based on the recent sampling exercise, the best estimate was that 35% of the current PBTL book should be risk-weighted at 100%.

144.

The decisions required were summarised as:

(1)

New business would be stratified to separate out residential PBTL at 35% and other PBTL at 100%.

(2)

Resources were needed to capture additional data to enable accurate classification and modelling of eligible PBTL prior to IRB Application to PRA.

(3)

Existing ineligible PBTL loans to retain 35% risk weighting, and to be “managed down” so that by the time the PRA approve the application for IRB to be applied to the commercial loan book, these loans would not be material.

145.

During the meeting, Mr Somers explained the background and the decisions required. He emphasised “the need to identify what assets are eligible to be retail or otherwise” and agreed to consider whether to carry out a “95% or 99% sample”.