Sole trader expenses - loan from friend to buy equipment

Ojb

Hi all
I run a sole trader business which is a little skip company.
I am currently using a business account and customers pay in there and I take out for fuel and tipping costs.
So I might take 3000 a month but spend 2000 and then make 1000 profit.
However I owe a friend 20 grand for buying my lorry and skips for me. I am here to ask how I can best pay him back most tax efficient?
I am thinking is it possible he invoices me for the owed money each month and I can pay this as a business expense? Therefore effectively buying the lorry and skips back off him?
Any advice appreciated

tebthereb

I assume having taken a loan to buy equipment that you already own the equipment - so I am not sure why your friend would invoice you. If he did that would be income for him so possibly not something that would be efficient for him.

You should get tax relief on the equipment costs and for any interest incurred on the loan in the year these costs arise which seems a good result already.

00ec25

who owns the lorry?

if he does, then the status of the 20K is unclear, it could be a hire purchase agreement and whose responsibility to insure it is open to question

if you do, then the 20k is simply a loan to be repaid

neither require monthly invoices, but both do require loan agreement documentation that will show how much is to be paid and by when.

a loan means 2 things: a) you have to repay the sum of money and b) there may, or may not, be an interest element on top of the amount borrowed. The amount to be repaid will evidence if there is interest since if the repayment is more than the purchase price then patently there is interest included in the repayment.

if you do not know how to account for capital allowances on commercial vehicle purchase then you'd be better off getting an accountant who does

if you do, then the only element remaining is whether there is interest. If there is, then that is a business expense