Loan from family - expense or gift

jellybeantinker1

Can a family loan at 0% interest, but with an £800 monthly payment be classed as a business expense?

The loan has been paid back in full (the £800 paid per month has not been deducted from the amount paid back).

e.g £50K loan
£800 per month (£9600 over the year)
50K paid back

comeandgo

So you want to reduce your taxable profits by £800 a month on what? Did you get any repairs done?

jellybeantinker1

change to initial question to make question clearer!

00ec25

jellybeantinker1 wrote: »

Can a family loan at 0% interest, but with an £800 monthly payment be classed as a business expense?

The loan has been paid back in full (the £800 paid per month has not been deducted from the amount paid back).

e.g £20K loan
£800 per month (£9600 over the year)
20K paid back

emphatically No
repaying the capital element of a loan is NOT an expense, it is simply a cash movement:
a) money into the bank as principal received, and a loan creditor created on the balance sheet
b) money out of the bank account and a reduction in the size of the creditor on the balance sheet

there is no impact whatsoever on the profit and loss account because there is no "cost" (ie interest) paid

perhaps you need to get an accountant ????

Pennywise

It's what the money was spent on that may be a deductible expense if it was eligible. The loan repayments can't be - you'd then have had the tax relief twice if you claimed it on what you spent the loan on and then again on the loan repayments.

jellybeantinker1

Thanks for your reply.
The money did not hit the bank account, but was a loan in regards to purchasing property, and then I paid the £800 per month.

There was no mortgage on the property.

I do have an accountant, and they spoke to HMRC who said it would be treated as a gift, i just wondered if this was actually the case based on my query. Thank you.

00ec25

jellybeantinker1 wrote: »

I do have an accountant, and they spoke to HMRC who said it would be treated as a gift,

then something got lost in translation because there is no way a repayable loan would ever be classed as a gift for either donor or donee and if your accountant had to ask HMRC that then ask your accountant what their qualifications are