Interest on Loans

dont_use_vistaprint

If you lend money at one rate to lend to a company at a higher rate, is the interest tax deductible in all cases if you pay higher rate tax on the earnings - or only for shareholders.

00ec25

incomprehensible question - do you know the difference between "to borrow" and "to lend"?

do you actually mean:
- borrow money at one rate, where you pay interest to the company that loaned the money to you

and

- you loan that borrowed money to another company who pay interest to you on their borrowings from you

are you borrowing funds in order to lend to them out as part of a trading activity you are undertaking?
do you have a licence to lend money?

dont_use_vistaprint

Yes...

If I take out a personal loan and use the capital to help a business that I'm not a director of, or hold any shares, and they pay me back , can I get tax relief on the interest I pay and/or offset it as an expense against the profit I make, via a self-assessment form.

are you borrowing funds in order to lend to them out as part of a trading activity you are undertaking?
No, I'm not involved in their trading.

do you have a licence to lend money?
No

uknick

If you're not trading, then no you can't claim the loan interest you pay as an expense. Otherwise, we'd all do it for the loans we take out. Last time this type of relief was available to a non trading individual was MIRAS on mortgages, which finally ended back in the early 1990s.

dont_use_vistaprint

uknick wrote: »

If you're not trading, then no you can't claim the loan interest you pay as an expense. Otherwise, we'd all do it for the loans we take out. Last time this type of relief was available to a non trading individual was MIRAS on mortgages, which finally ended back in the early 1990s.

Thanks.

I am trading, but not with the company raising capital. I diddnt mean any loan, just the interest paid specifically for this loan, because Ill pay HR tax on the repayments I receive wont I ? Which seems like double taxation

uknick

You can only claim expenditure in the course of running your business, which you know.

To claim the loan interest you're paying you'd have to incorporate money lending in your business practice, as 00ec5 suggests. Probably more trouble than it's worth.

I'm not sure why you think it's double taxation. If you want to ensure you end up with the cash in your pocket you want after the tax, why not charge the business more?

00ec25

no you cannot claim the cost of interest paid on money borrowed for non trading purposes

if you choose to borrow money in order to invest that money into a business that will pay you interest, it is no different to borrowing money and putting it in a personal savings account that pays you interest (except of course in the latter scenario it would be near impossible to have a positive margin on the rate differential)