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Posted Thu, 20 Jan 2022 13:38:52 GMT by Dean Robinson
Hi, My Mrs has recently started her own business / self employed sole trader, She is registered for SA and will need to complete for 21/22. I loaned her £4000 (for training to gain the skills to execute her business) and then an additional £1000 as start-up capital to cover banking, marketing charges, admin materials etc until she gained her own income. The loan is interest free and is a loan, not an investment. I am struggling to understand whether she can pay both / either loan back to me as an "allowable expense" or not? Is anyone able to confirm? She is using cash based accounting model. Her earnings look like they will exceed £13,000. Many thanks in advance.
Posted Fri, 21 Jan 2022 17:17:14 GMT by HMRC Admin 20
Hi Dean Robinson,

The repayment of the capital element of a loan is not an allowable expense.
Your wife needs to consider what the loan was used for.
If the money on the first loan was used for training to gain the skills, then this will not be treated as an allowable expense

BIM70035 - Cash basis: expenses: capital expenditure

However some of or all of the £1.000 pound loan for materials and running cost should be allowable.

Please see details of allowable business expenses here:

HS222 How to calculate your taxable profits (2021)

Thank you.

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