<b>Any Answers:</b> Incidental costs of finance. By Paula Tallon

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Paula Tallon, director of direct tax with Chiltern responds to accountants' queries.

Q: My client is refinancing a loan and in the terms of the original loan there is a charge payable to the lender. Is this cost part of the incidental costs of finance so that relief will be available?

A: The first question is whether your client is an individual or a company as the rules are very different. If your client is a company the payment is dealt with under the loan relationship provisions. Section 84(3) and (4) FA 1996 deals with the expense which are allowable as debits. Section 84(3)(c) covers payments under a loan relationship or a related transaction. HMRC's Corporate Finance manual (5210) gives an exampl...

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By John R
14th Jan 2010 19:07

Penalty interest now allowable for individuals?

Paula - do you agree that the Revenue now consider that in the majority of cases penalty interest is allowable for individuals? They seem to have updated the manual 45820 since you wrote your answer, in the light of the Kato Kagaku case (SPC598).

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