Hi Everyone.Hope you are all well.I haven't posted for a while, coz I'm not as knowledgeable as most but I do look in every day as all of your discussions are amazingly helpful for my own personal CPD . Thank you all for helping everyone.
I wonder if I might have peoples thoughts on the following 2 scenarios, please.
Scenario 1:
Sole Trader in first year of business.Cannot get finance for vehicle (van).Family member takes out a loan and gives the money to sole trader.
The family member provided copy of the finance agreement and a signed, written statement saying that loan was taken out for this business and that the sole trader would pay the amounts (principal and interest, as per loan agreement) directly to him every month.
I know the repayments of principal cant be claimed as expense.But can the interest be claimed through the business or would it need to go through Drawings, seeing as the loan was not in the name of the business/sole trader? The business has made a first-year loss so it wouldnt be reducing tax bill any, if thats relevant.
Scenario 2
Sole Trader in year 2 of business.Cannot get finance for car.Her partner buys a car, financed in his (partner's) name, for the sole trader.Is there any way that this expense (or any part of) can be put through the business?The car is a low-emissions and in this case, would reduce the tax bill by a fair amount.
Hi
I might not be the person who gives an eventual answer on this one (not my bag/hitting a busy period again this week) but in order to help someone more can I ask:-
scenario 1) has the van been put through the books? How does the sole trader know that once he pays the family member that the family member actually repays the loan. Might be better if he actually makes the payments direct. (anyone else have any thoughts on this?)
scenario 2) whose name is on the log book for this car - her partners? Whose name is on the insurance document? Would suggest that this one is probably a no. Does he have another car for himself (what job does he do/would he need a car v what business is she in/does she need a car - these last ones are just so you consider whether or not the car is actually being used for the business or not and its just a try on to get the tax down).
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Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
Thanks Jo, that's very good advice. I can see I need to be asking more questions.
The van in scenario 1 was put through the books and hopes to claim AIA. I guess that's OK so long as the van is in his name (which it is). Just not sure about the interest repayments.
With the car in the second scenario, I'm guessing all of the documentation will be in partner's name. So I think probably not as well and I've said as much. I was just having to think twice (or more) because the situation with the van seemed so similar but was set up differently and has a very different outcome.
Thanks for taking the time to help, it's much appreciated.
Hi
I think you would have a better case to answer if the loan repayments were going from him direct to the loan company. But if the agreement they have actually shows the split you might be ok.......anyone else advise?
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Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
In my second scenario, where the car finance was taken out in somebody else's name, the answer was a straightforward "no, but can claim 45p per mile".
That's a scenario I will be facing in the next few months with a client, so it's good to know the answer in advance.
Just so I'm aware, I know fuel, repairs, insurance and tax can't be claimed, but can car cleaning costs? It's a taxi and gets washed at a hand car wash regularly.
-- Edited by Leger on Wednesday 27th of January 2016 06:57:00 PM
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John
Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.
. Thank you all for helping everyone.
