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Interest on credit card used to fund Limited Co

Is interest charged on a personal credit card used to help fund a limited company allowable at all?

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Client set up a limited company a couple of years ago and used his personal credit card to help fund the business. He feels the interest charged on the credit card was only incurred because he was helping to fund his business and so he should be able to claim it. I have explained that unless the expenditure on the card was solely incurred on his business and there was no personal spending then he can't claim the interest was wholly, exclusively and necessarily for the business. I would think for a sole trader you could probably apportion but I don't think you can with a Limited Company. 

If my view is correct is there any chapter and verse in this area that I can refer him to.

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By frankfx
16th Oct 2017 17:09

tax relief on interest incurred in this instance is not allowed.
HMRC manual makes it clear.
even if 100% of personal credit card usage was for business expenses, interest can not be claimed.
interest on a personal overdraft gets the same outcome
whereas a personal loan used for business costs does get interest relief.

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Replying to frankfx:
By JCresswellTax
17th Oct 2017 09:16

frankfx wrote:

tax relief on interest incurred in this instance is not allowed.
HMRC manual makes it clear.
even if 100% of personal credit card usage was for business expenses, interest can not be claimed.
interest on a personal overdraft gets the same outcome
whereas a personal loan used for business costs does get interest relief.

This is spot on. Basically 'informal' finance cannot receive tax relief on interest, 'formal' finance can.

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By anneaccountant
16th Oct 2017 17:56

Hi Frankfx
I thought this was likely to be the case. Do you have the HMRC manual number/reference? That would be very helpful. Many thanks

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RLI
By lionofludesch
16th Oct 2017 18:07

If only he'd got a credit card in the company's name .......

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Replying to lionofludesch:
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By WhichTyler
17th Oct 2017 08:03

If the company was successful enough to get its own card, it probably wouldn't have needed 'supporting'

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By anneaccountant
17th Oct 2017 10:04

Many thanks for the feedback. It is what I suspected but I have been trying to locate the specific HMRC guidance note that covers this and don't seem to be able to find it. I just want some thing specific I can show to the client to confirm our view to him
Thank you

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By slipknot08
17th Oct 2017 13:33

for individuals investing loaned funds into a company, s.384(1) ITA 2007 applies -
General restrictions on relief under Chapter
(1) Relief is not to be given under this Chapter for interest on a debt incurred—

(a) by overdrawing an account, or

(b) by debiting the account of any person as the holder of a credit card or under similar arrangements.
(& see also SAIM10020)

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By anneaccountant
17th Oct 2017 14:55

Thank you Slipknot; very helpful

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By Portia Nina Levin
17th Oct 2017 15:55

If the only expenditure on the credit card pertains to the company, I see no reason why the individual should not be reimbursed it, and the company take a deduction for it.

The provisions that are being referred to relate only to the individual obtaining tax relief.

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