Sole Trader and loans

Lucy_H
Lucy_H Registered Posts: 2 New contributor 🐸
in Tax
Hello so my brother a sole trader (and not vat registered) received a loan from me for £4000 to buy a van to help with his business (with 0 interest of course). He would like to know if this £4000 loan counts as business income on his self assessment, also if the payments made back to me can be written off against his tax as a business expense.
Thank you in advance for your help!!
Lucy

Comments

  • davealucas
    davealucas Registered Posts: 156 Dedicated contributor 🦉
    No, the £4,000 loan should be treated as that, a loan. Your brother should record it as an amount of money received and also create a creditor (the creditor would be you).

    Equally, any repayments of that loan should be recorded as a payment out but reduces the amount owed to you. It cannot be written off against his tax as a business expense. However, if you charged him interest on top of the loan, your brother could write that off against his tax.

    Now, the purchase of the van can be depreciated over time and can be claimed as a capital allowance from the taxman over a period of (I think) 4 years.

    Ideally, your brother really should engage an accountant to help him keep his business financial affairs in order and provide any taxation advice. Alternatively your brother should learn how to be a book-keeper.
  • Lucy_H
    Lucy_H Registered Posts: 2 New contributor 🐸
    Hi Davealucas, yes I suspected that was the answer but thought I’d double check here. Thank you so much for your help!!

Categories

Privacy Policy