For those in business - Accounts question

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Losos

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It's a simple enough question but I suspect the answer might not be, but here goes.

If you run a business (Either sole trader, partnership, or limited company) and you have a loan (from a bank or building society or even a rich uncle!!!) and you pay interest on that loan.........

Is that interest payment a business expense :?: In other words can you deduct it from your profits BEFORE paying tax, or does the tax man not allow this :?:

Some people think I'm mad to consider starting a business at my age and in the current climate but I am and would be grateful for any advice.
 
paultnl":3lzcgs55 said:
Worth checking with an accountant for the best way of doing this, but yes you can count interest as a business expense.
Thanks Paul, yes I will get face to face with an accountant at some point, right now I could only phone and I'm aware that they don't like talking to people they've never met over the phone, I could be anybody couldn't I :lol:
Appreciate your answer, BTW if it goes ahead it won't be a million miles from where you are but don't worry I guarantee it won't take any customers away from you :)
 
Of cause, if the loan is indeed a business loan. At the end of each tax year you are asked if you had/have any loans and what you have paid back plus interest. If your rich uncle is indeed loaning you the money it needs to be done properly for it to be classed as a business loan and interest. Not sure on how to make it official but just him paying it into your business account could be enough then you paying him back electronically form your business account.

If your looking for bank recommendations then Lloyds TSB have never upset me, let me down or even failed to do what they said they would. There business banking is the best I have ever used and seen! An example: I asked them for a loan and the granted it. I needed the money faster then could process as it was for an auction. Without question the money was there before they had got the paperwork back inform of a rather large 1 week overdraft. There online banking system is great!
 
Losos":27jb9v95 said:
if it goes ahead it won't be a million miles from where you are but don't worry I guarantee it won't take any customers away from you :)

Unless you are going into the contact centre industry, you wont be competing with me. Wood is my hobby not my job.
 
Losos":3bi4xjwk said:
It's a simple enough question but I suspect the answer might not be, but here goes.

Some people think I'm mad to consider starting a business at my age and in the current climate but I am and would be grateful for any advice.

I dont know anything about tax and loans but may I say its never to late to start your own business, I wish you all the luck in the world.

Stew
 
Hudson Carpentry":or4yihsf said:
If your looking for bank recommendations then Lloyds TSB have never upset me, let me down or even failed to do what they said they would. There business banking is the best I have ever used and seen!

Thanks, as it happens I'm with Lloyds as well 'tho in this case it might not be them lending me the money it will be more akin to the 'rich uncle' and I take your point about getting it properly documented.
 
paultnl":3nykandt said:
Unless you are going into the contact centre industry, you wont be competing with me.

:lol: :lol: :lol: No definately not a 'call centre' - sorry have to be a bit coy about it right now :wink:
 
DIY Stew":cen6220h said:
but may I say its never to late to start your own business, I wish you all the luck in the world.
Stew

Thanks Stew, the glass is always half full in my world :lol:
 
Dibs-h":v8xrg3nv said:
For a business loan - i.e. one in the companies name (irrespective of directors guarantees) the interest is a genuine business expense and there deducted pre-tax.
Dibs

Thank you Dibs and for the links which I will check out first thing tomorrow (Getting sleepy now :roll: )

To all the people above, thank you all for your advice and it's a 100% yes to 'tax deductable' thank God there's some good in the Inland Revenue - I always see them as the bad guys :lol: maybe that's a tad unfair :!:
 
Claiming tax relief for interest paid to a rich uncle will of course alert the taxman that your rich uncle has yet more taxable income.

Might be worth checking out that he is happy with that first?


Bob
 
Hi Losos

Good luck with the new venture.

In general terms, all legitimate business expense can be deductable which includes the interest on genuine business loans and whilst you will probably get free business banking initially, if you later incur charges, they are allowable also.

The IR can be sticky about any % you claim for facilities and bills you share especially if working from home so get the figures right for say utilities and rates etc.

Bob
 
9fingers / Lons - Thanks for replies, I'm very happy that my initial question has been answered since every reply said that the interest paid is a genuine business expense a 100% yes is pretty good indication and that's all I wanted right now, when I do get to sit in front of an accountant I will go over this again. The 'back of a fag packet' calculations were telling me that I needed this interest payment to be tax deductable to give the start up a half decent chance of working.
 

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