remortgage house to buy business premises

deborahcarpenter

Good evening all,

I have a sole trader who has remortgaged his house to buy a shop. He wants me to show the mortgage payments as a business expense.
As i see it he can claim the interest payments on the mortgage and then capital allowances on the shop etc. But he is telling me he wants to claim the whole mortgage amount through the business as a loan repayment?

Also he has a car on finance. As i see it he can only claim the interest payments as a business expense and capital allowances on the purchase of the car, but again he wants to claim the whole finance cost as well as capital allowances?

Any suggestions on anything I may have missed much appreciated.

JodieR

You're totally right, you can never claim the repayment of a capital sum as an expense. To explain that to a client you need to explain to them that they didn't have to declare the lump sum received to buy the property/vehicle as sales, and therefore repaying it can't be an expense.

Fingersan

Hi Deborah

You are absolutely correct in saying that you can only claim the interest on both loans. However, it may be worth clarifying with your client what he wants to do. It may be that when he says claiming the repayments, does he simply mean paying them out of the business bank account, in which case, that should not be a problem.

I am reading this as more of a 'can I make the payments out of the business' point rather than a 'is this tax allowable' point. I may be completely wrong though! :001_smile:

deborahcarpenter

Hi Fingersan, Yes he is paying the mortgage through the business account which isnt a problem but he wants to claim the whole lot as a business expense!! I advised him he couldnt do this before he took out the remortgage but some clients just dont take any notice of what you say!!! Anyone else have clients like this??

TreadStone

deborahcarpenter wrote: »

Hi Fingersan, Yes he is paying the mortgage through the business account which isnt a problem but he wants to claim the whole lot as a business expense!! I advised him he couldnt do this before he took out the remortgage but some clients just dont take any notice of what you say!!! Anyone else have clients like this??

Yes, but if they don't listen or don't want to listen they are quickly moved on.

Stick to your guns and do the correct thing.

PGM

Isn't there an issue with using mortgage costs from your home, as a business costs?