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Qualifying Loan Interest Relief - Does Money Have to Move

Qualifying Loan Interest Relief - Does Money...

OK we have a client who's Company owes them £40k (50% shareholder).

The Company pays interest on this loan. We do CT61. Company withholds and pays over 20%. All goes on tax return.

Client took out a £25k loan to buy a car a year ago and didn't tell us.

HMRC HS340 says tax relief if loan is for certain specific purposes. S392 ITA 2007 says "that is used".............

If he had taken the loan out and paid it in to the Company as a new loan and then repaid some of the original loan to buy the car the new loan interest would be tax deductible.

So should we claim the interest relief on the new loan or tell the client to refinance and move the money around so that there is a bank receipt for the money borrowed? doesn't seem to shed any light

Should we err on the side of caution???!!!




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02nd Mar 2016 10:57

I think saim10000 does shed a little light

specifically here:


Your plan would result in the situation returning to exactly as it is now. 

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By roblpm
02nd Mar 2016 12:04

Didn't get that far! Thanks a lot.

However if the whole 40k was repaid first to the client by the company by temporary borrowing elsewby the company then it could all be restarted.

The moral of the story is dont loan money to a business and then borrow at a later date personally.


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By roblpm
02nd Mar 2016 12:08

Im not sure that applies if the company can afford to repay the loan and then the loan is put back in. No capital will have been repaid after the loan started. Still needs starting again though.

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