I am self employed as a subcontractor joiner.

In order to purchase a van for 60% business 
use I took out a loan from HSBC and have 
been claiming 60% of the interest paid as a
business expense.

I have recently part exchanged the van and 
purchased another one together with another
loan.

However, I did not pay off the 1st loan when 
I did this.

Can I continue claiming the interest paid on the
1st loan as well as the new loan?

Brandon.

Brandon wrote:

> In order to purchase a van for 60% business
> use I took out a loan from HSBC and have
> been claiming 60% of the interest paid as a
> business expense.
> 
> I have recently part exchanged the van and
> purchased another one together with another
> loan.
> 
> However, I did not pay off the 1st loan when
> I did this.
> 
> Can I continue claiming the interest paid on the
> 1st loan as well as the new loan?

Yes.  If you had paid off the first loan, you would have
had to borrow more on the 2nd loan.  Therefore both loans
together are in effect financing your van.

"Ronald Raygun" <no.spam@localhost.localdomain> wrote in message 
news:IMTej.71653$c_1.3658@text.news.blueyonder.co.uk...
> Brandon wrote:
>
>> In order to purchase a van for 60% business
>> use I took out a loan from HSBC and have
>> been claiming 60% of the interest paid as a
>> business expense.
>>
>> I have recently part exchanged the van and
>> purchased another one together with another
>> loan.
>>
>> However, I did not pay off the 1st loan when
>> I did this.
>>
>> Can I continue claiming the interest paid on the
>> 1st loan as well as the new loan?
>
> Yes.  If you had paid off the first loan, you would have
> had to borrow more on the 2nd loan.  Therefore both loans
> together are in effect financing your van.
>

Providing, of course, no part of either loan is funding drawings in excess 
of profits :-((

-- 
Martin

Martin wrote:

> 
> "Ronald Raygun" <no.spam@localhost.localdomain> wrote in message
> news:IMTej.71653$c_1.3658@text.news.blueyonder.co.uk...
>> Brandon wrote:
>>
>>> In order to purchase a van for 60% business
>>> use I took out a loan from HSBC and have
>>> been claiming 60% of the interest paid as a
>>> business expense.
>>>
>>> I have recently part exchanged the van and
>>> purchased another one together with another
>>> loan.
>>>
>>> However, I did not pay off the 1st loan when
>>> I did this.
>>>
>>> Can I continue claiming the interest paid on the
>>> 1st loan as well as the new loan?
>>
>> Yes.  If you had paid off the first loan, you would have
>> had to borrow more on the 2nd loan.  Therefore both loans
>> together are in effect financing your van.
>>
> 
> Providing, of course, no part of either loan is funding drawings in excess
> of profits :-((

I think your provision is equivalent to passing the test that the sum
of the amounts outstanding on the two loans at the time of purchase of
the new van, does not exceed the cost of the van.

Surely no-one in their right minds would be daft enough to pull a
stunt which doesn't pass that test!

"Ronald Raygun" <no.spam@localhost.localdomain> wrote in message 
news:rr9fj.72024$c_1.57708@text.news.blueyonder.co.uk...
> Martin wrote:
>
>>
>> "Ronald Raygun" <no.spam@localhost.localdomain> wrote in message
>> news:IMTej.71653$c_1.3658@text.news.blueyonder.co.uk...
>>> Brandon wrote:
>>>
>>>> In order to purchase a van for 60% business
>>>> use I took out a loan from HSBC and have
>>>> been claiming 60% of the interest paid as a
>>>> business expense.
>>>>
>>>> I have recently part exchanged the van and
>>>> purchased another one together with another
>>>> loan.
>>>>
>>>> However, I did not pay off the 1st loan when
>>>> I did this.
>>>>
>>>> Can I continue claiming the interest paid on the
>>>> 1st loan as well as the new loan?
>>>
>>> Yes.  If you had paid off the first loan, you would have
>>> had to borrow more on the 2nd loan.  Therefore both loans
>>> together are in effect financing your van.
>>>
>>
>> Providing, of course, no part of either loan is funding drawings in 
>> excess
>> of profits :-((
>
> I think your provision is equivalent to passing the test that the sum
> of the amounts outstanding on the two loans at the time of purchase of
> the new van, does not exceed the cost of the van.

Not quite.  There could be other business needs for the loans.  I'm not 
aware of any requirement that a particular loan be for a specific purpose - 
indeed, it could be advantageous to avoid (in this case) the 40% add-back.

> Surely no-one in their right minds would be daft enough to pull a
> stunt which doesn't pass that test!

Surely, we all do daft things, especially when we're in our "right 
minds"...?

BTW, is it snowing up there...?

-- 
Martin

Martin wrote:

> "Ronald Raygun" <no.spam@localhost.localdomain> wrote in message
> news:rr9fj.72024$c_1.57708@text.news.blueyonder.co.uk...
>> Martin wrote:
>>> 
>>> Providing, of course, no part of either loan is funding drawings in
>>> excess
>>> of profits :-((
>>
>> I think your provision is equivalent to passing the test that the sum
>> of the amounts outstanding on the two loans at the time of purchase of
>> the new van, does not exceed the cost of the van.
> 
> Not quite.  There could be other business needs for the loans.

Understood.

>  I'm not
> aware of any requirement that a particular loan be for a specific purpose
> - indeed, it could be advantageous to avoid (in this case) the 40%
> add-back.

Add-back?  How crude!  I'd assumed it would have been a personal loan,
not one going through the business accounts.  Together with his usual
drawings he would then take out an additional sum to cover 60% of the
loan interest.

Even if he had put the loan through the business accounts, were he to
put 100% of the interest through the books as an expense, then yes, he
would have to add 40% back to the net taxable profit as extra "income",
but a much cleaner approach would be to put down 60% of each interest
payment as an expense and 40% as drawings.

>> Surely no-one in their right minds would be daft enough to pull a
>> stunt which doesn't pass that test!
> 
> Surely, we all do daft things, especially when we're in our "right
> minds"...?

Speak for yourself.  :-)

> BTW, is it snowing up there...?

Not any more.  Had about 4" over the past 2 days and half of it has
already melted.

"Ronald Raygun" <no.spam@localhost.localdomain> wrote in message
news:vrufj.72484$c_1.26753@text.news.blueyonder.co.uk...
> Martin wrote:
>
>> "Ronald Raygun" <no.spam@localhost.localdomain> wrote in message
>> news:rr9fj.72024$c_1.57708@text.news.blueyonder.co.uk...
>>> Martin wrote:
>>>>
>>>> Providing, of course, no part of either loan is funding drawings in
>>>> excess
>>>> of profits :-((
>>>
>>> I think your provision is equivalent to passing the test that the sum
>>> of the amounts outstanding on the two loans at the time of purchase of
>>> the new van, does not exceed the cost of the van.
>>
>> Not quite.  There could be other business needs for the loans.
>
> Understood.
>
>>  I'm not
>> aware of any requirement that a particular loan be for a specific purpose
>> - indeed, it could be advantageous to avoid (in this case) the 40%
>> add-back.
>
> Add-back?  How crude!  I'd assumed it would have been a personal loan,
> not one going through the business accounts.  Together with his usual
> drawings he would then take out an additional sum to cover 60% of the
> loan interest.
>
> Even if he had put the loan through the business accounts, were he to
> put 100% of the interest through the books as an expense, then yes, he
> would have to add 40% back to the net taxable profit as extra "income",
> but a much cleaner approach would be to put down 60% of each interest
> payment as an expense and 40% as drawings.

I agree this is possible and permissible.  But in the world of HMRC folk -
esp those who do daft things when in their right mind - they will (on a good
day) spot a 40% add back on motoring costs, and wonder why same doesn't
pertain for interest on loan to buy said wheels.  There again, if you go the
sensible route of no balance sheet (at least, not on SATR) and mileage rate
rather than actual costs, I guess no-one notices.

>> Surely, we all do daft things, especially when we're in our "right
>> minds"...?
>
> Speak for yourself.  :-)

Well, I do.  So I did.  (I'm sure some french filosofer said something
similar...:-)  )

But, hey - I thought you lot sealed off your city centre every NY eve and
then charged people to enter and get pi**ed?  If that's such a good idea,
isn't it daft not to do it the other 364 days - when (presumably) you're all
in your right minds?  :-)

> Not any more.  Had about 4" over the past 2 days and half of it has
> already melted.

Shame it's melting.  Bet it all looked super...


-- 
Martin