Loan interest tax relief

Loan interest tax relief

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We act for a 2 partner business.  Partner B has already left the business leaving Partner A to continue as a sole trader.  The date of partnership dissolution is 31/05/2012.

Partner A has now agreed to pay Partner B a sum of money to buy him out.  This money will be loaned from the bank.  If this loan funding is paid into the new sole trader bank account prior to being paid to Partner B will the loan interest element qualify for tax relief?  The business is a brewery and has plant, stock etc which will simply pass from the partnership to the sole trader so in essence the loan is being used to acquire assets .

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By Phil Rees
09th Aug 2012 16:53

Sounds all right to me  but I'm starting my holiday in a matter of minutes from now.

Interest on a loan to buy a share in a business is allowable so there should be no problem. Asset values may have to be negotiated wrt goodwill etc but in principle it looks OK.

 

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By ACDWebb
10th Aug 2012 07:56

Presumably as A is moving to sole trade

the loan should be claimed through the accounts as a business expense, rather than as a personal loan claimed on the tax return

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