Loan expenses question

[blutopaz]

Hi geeks, Just wondering if anyone knows......

I took a loan out for a fair few thousand pound last year to fund a venture into a new salon. I took it out as a personnal loan as it was so much easier to do so for various reasons.

I have read i cannot claim back the loan amount but the interest is an allowable expense for my tax return.

Firstly does it matter that it was a personnal loan even though its ploughed back into my business?

And seondly is the lump sum of the loan viewed as an income and therefore liable for income tax etc?

Many thanks all

 

[lilacm]

No it doesn't matter that it was a personal loan the interest is still an allowable expense as long as you have a statement showing the interest which you normally would get once a year.

The lump sum is not seen as income just a cash injection that would be shown as a long term creditor on your balance sheet. Therefore the loan itself will not have any effect on your tax.

Hope this helps.

 

[persianista]

It is quite complicated, but the circumstances you describe are for a commercial mortgage, not a loan.
The interest payable can indeed be offset against profits. The money you put into a business does not count as income or profit for taxation purposes.
Your accountant will be able to give you advice as to how best to take back the initial investment over a period of time.

 

[blutopaz]

Thanks guys,

I don't have a mortgage, I took out an unsecured personnal loan to cover the fitting out of a new salon.

I can still claim this back being a personnal loan can't i?

 

[jes]

Yes you can claim the loans interest as an expense. The amount of the loan will not be seen as income and therefore not taxable but any amount of interest it makes will be.

Hopefully, you paid the loan into your business account as cash and didn't transfer it over from a personal account to your business one?

 

[blutopaz]

I don't have a business account, I'v always just kept a second personal account for business stuff, when i took the loan out i took it out in a new personal account as i was using a different bank. would this cause an a big issue then? I know your meant to have a business account but i never saw the need to :S

 

[jes]

You don't actually have to have a business account, but you really must keep business and personal dealings separate.

If you've transferred the loan money from one account to the another, that you're using for business, then you've left a paper trail between the two accounts. Should you have an investigation from HMRC they'll see this trail and want to see all the statements from both accounts. They'll then want you to account for all payments into them.

It's not a problem (as long as you're not hiding anything, which I'm sure you're not) but it just makes things overly complicated.

jes