Sole-trader is interest on loan from spouse allowable?

RomfordNavy

Does anyone know if a sole-trader can borrow money from their spouse for the business with the interest paid being an allowable business expense?

If a loan is from a bank or even from a friend then the interest paid is allowable as an expense on the accounts but what if that load is from a spouse?

DullGreyGuy

I know you can't claim it as a loss if you loan your spouse money and they default on repayment to you. 

What is the borrowed money going to be used for? Even regular debt has conditions on if interest can be offset against revenue. 

The right answer is to speak to an accountant and then if they give bad advice you can claim against them.

If you were to do it then you are going to have to consider arms length rates as HMRC can ignore the rates actually paid and adjust it for one or the other party such that it was at commercial rates when the parties are related... ie spouse cannot charge you 50% interest and were HMRC to spot thats what's happened your profits would be recalculated on the prevailing rate say of 6%

Note also they will have to declare the interest received for their own tax calculations. 

RomfordNavy

Purpose is to provide working capital.  Currently this debt, approx £60k, is financed by credit cards.