Allowable bank charges & interest for self-employment

Allowable bank charges & interest for self...

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A self-employed client that is struggling financially, is wanting to claim a large amount of bank & credit card charges and interest. She has two overdrawn bank accounts, one mostly used for business and one most used for personal expenses, as well as a number of overdrawn credit cards. I think that we can go with the charged and interest on the account that is mostly business, but as regards the rest, I think I've seen in recent months that HMRC's view is that if there is mixed use, none is allowable, unless it can be shown that she was buying for the business. I've tried to explain to the client that it could be argued that she is funding her lifestyle. Can anyone direct me to anything written on this subject?

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By Craigie_Bhoy
20th Jul 2012 12:11

totally agree.  If business

totally agree.  If business related, go for it - like the account that is mostly business.

Perhaps a portion of the other account and credit card could be claimed? business expenditure divided by total expenditure then multiply the fraction by the interest and charges?  If a calculation of apportioned charges and interest can be seen to be just and fair I see no reason why this wouldnt be allowable.

Not sure of anything written or any guidance but thought i would share my thoughts and agree with your thoughts.

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By mydoghasfleas
20th Jul 2012 13:12

HMRC Manuals BIM45650 - Specific Deductions - interest: Contents
BIM45650 - Specific deductions - interest: Contents

This chapter applies for income tax purposes to the computation of trading profits and property income. It does not apply for CT purposes, where there are separate rules in the loan relationships legislation (CFM30000). From 6 April 2005 payments of profit share returns and alternative finance returns are treated for tax purposes as interest.

The root for this is s34 IT(TOI)A 2005; sadly I still remember the personal use bit as being section130(b) ICTA 1970.  Cue the much used movie line, "I'm too old for this s**t!"

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