10k loan

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Discussion

swansea v6

Original Poster:

1,281 posts

231 months

Saturday 5th December 2009
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I have recently started my own company (GP referral/cardiac rehab/personal training) and am after some advice before I see my accountant in the week. I need to raise around £10k to purchase some new equipment, defib machine, hoist for pool etc and was wondering what would be the easiest way??

Try and get a personal loan for the amount? Or maybe a business loan, bearing in mind the company has only been going since September. As I said I will be speaking to my accountant in the week but just thought I would ask the PH collective first.

Arese

21,044 posts

193 months

Monday 7th December 2009
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Personal loan is probably the cheapest, or maybe free up some cash if you have equity in your house through your mortgage? Then when you start raking it in (think positive) you should be able to get a settlement figure for your loan (check the terms and conditions), or throw it back off your mortgage.

Good luck in your venture.

Eric Mc

122,685 posts

271 months

Monday 7th December 2009
quotequote all
If the loan is obtained as a company loan, then the company will be able to offset the interest charges and arrangement fees against its taxable profits - thereby obtaining tax relief. If you take the loan out personally, it will not be eligible for tax relief.

Arese

21,044 posts

193 months

Monday 7th December 2009
quotequote all
Eric Mc said:
If the loan is obtained as a company loan, then the company will be able to offset the interest charges and arrangement fees against its taxable profits - thereby obtaining tax relief. If you take the loan out personally, it will not be eligible for tax relief.
Would it be easy to obtain a £10k business loan with no trading records?

Eric Mc

122,685 posts

271 months

Monday 7th December 2009
quotequote all
It certainly wouldn't be impossible - but it could be difficult and possibly expensive. You just have to weigh up the pros and cons as to which route to go.

Arese

21,044 posts

193 months

Monday 7th December 2009
quotequote all
Eric Mc said:
It certainly wouldn't be impossible - but it could be difficult and possibly expensive. You just have to weigh up the pros and cons as to which route to go.
Another question for you, as I know you're good at these things.

If the OP took a personal loan out, and then loaned that to the company, would he be able to charge his company interest? scratchchin

Mx_Stu

819 posts

229 months

Monday 7th December 2009
quotequote all
Eric Mc said:
If the loan is obtained as a company loan, then the company will be able to offset the interest charges and arrangement fees against its taxable profits - thereby obtaining tax relief. If you take the loan out personally, it will not be eligible for tax relief.
S.390 ITA 2007 - Its not my area but recall from studies that if you take out a personal loan to buy plant or machinery then any interest is a deductible payment in arriving at taxable income for the year?

Eric Mc

122,685 posts

271 months

Monday 7th December 2009
quotequote all
Mx_Stu said:
Eric Mc said:
If the loan is obtained as a company loan, then the company will be able to offset the interest charges and arrangement fees against its taxable profits - thereby obtaining tax relief. If you take the loan out personally, it will not be eligible for tax relief.
S.390 ITA 2007 - Its not my area but recall from studies that if you take out a personal loan to buy plant or machinery then any interest is a deductible payment in arriving at taxable income for the year?
If the loan was taken out to buy shares in the company, then the interest can be claimed for personal tax relief.

If the loan was taken out personally by a director and that money was then paid into the company to allow the company to buy plant and machinery (not cars), then the interest is also allowable against the director's personal Income Tax.

The COMPANY can only claim tax relief on interest on a loan for which it is contractually liable.

Eric Mc

122,685 posts

271 months

Monday 7th December 2009
quotequote all
Arese said:
Eric Mc said:
It certainly wouldn't be impossible - but it could be difficult and possibly expensive. You just have to weigh up the pros and cons as to which route to go.
Another question for you, as I know you're good at these things.

If the OP took a personal loan out, and then loaned that to the company, would he be able to charge his company interest? scratchchin
Yes, he could charge the company interest. The company, in turn, could claim the interest it is paying the individual against its taxable profits.

However, limited companies are obliged to deduct Income Tax at source on interest it pays to individuals and pay this tax over to HMRC on a quarterly basis.

Mx_Stu

819 posts

229 months

Tuesday 8th December 2009
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Eric Mc said:
If the loan was taken out personally by a director and that money was then paid into the company to allow the company to buy plant and machinery (not cars), then the interest is also allowable against the director's personal Income Tax.
S.390

Applies to a loan that is to be used for capital expenditure

Applies to plant or machinery if:
a It is used for the purpose of an office or employment held by the individual;
b The plant and machinery belongs to the individual; and
c The individual can claim capital allowances or a balancing allowance in respect of it

More info here:

http://www.hmrc.gov.uk/manuals/saimmanual/SAIM1020...

Eric Mc

122,685 posts

271 months

Tuesday 8th December 2009
quotequote all
Of course an individual can claim Capital Allowances against his Earned Income PROVIDED that the loan was for Plant and Machinery used as part of his/her duties as en employee or director.

Just using the loan to buy plant for the business may fail this rather stringent test as the purpose the busiiness uses the plant could be different to the duties performed by the employee/director who provided the loan.

Obtaining tax relief for employees and directors in respect of expenses or Capital Allowances is subject to the "Wholly Exclusively and Necessarilly" test as opposed to the less onerous "Wholly and Exclusively" test applying to businesses.

And there does seem to be a difference in approach between funding a Plant and Machinery in a sole-tradership/partnership compared to a limited company.