Showing posts with label financing. Show all posts
Showing posts with label financing. Show all posts

Thursday, April 12, 2018

Refinancing of a buy-to-let: the tax implications

It's has been common practice in the past to refinance a property and then expense the additional interest against property income, as long as the amount borrowed was still smaller than the original cost (or the value when the property business started).

But in April 2017 HMRC rewrote its guidance to restrict deductions to those cases where the proceeds of the loan are actually used in the property business and not for other purposes.

Prior to 2017 HMRC manuals used to contain this example:
  • You purchased a buy-to-let property for £120,000 with a mortgage of £90,000 and let it to a tenant straight away.
  • Three years later the property is valued at £150,000 and you increase your mortgage on the property to £115,000. All of the interest on the mortgage can still be claimed as a revenue expense as the loan doesn’t exceed the initial £120,000 value of the property when it was introduced to your letting business.
  • If you increased the mortgage to £125,000, the interest payable on the additional £5,000 is not tax deductible and cannot be claimed as a revenue expense.

Thursday, March 1, 2012

Innovative ways to fund your business

The lasting economic downturn has made it more difficult for small businesses to find the cash required to grow their business. Banks constrained by shrinking profits and increasingly stringent capital requirements have shun from lending to SMEs. And lending targets or the arrival of new entrants on the market will hardly change that.

While the banks have continued to lend through overdrafts and credit cards at extortionate rates, there are other options now available for the creative small business...
  • The Enterprise Finance Guarantee (EFG) -- it is a loan guarantee scheme intended to facilitate additional bank lending to viable SMEs with insufficient or no security with which to secure a normal commercial loan. There is an additional cost of 2% per annum but it can prove a great option when the business has no assets to secure a loan against. Just ask your bank about their EFG options.

Thursday, September 8, 2011

The Tough Times Business Checklist

With business conditions deteriorating for a lot of firms, now could be the time to review the way you run your business.

With the help of consultancy group 2020 we have put together a "tough-times business checklist" that will allow you to ensure that you stay on the right track during the turbulent times ahead:

  • Review your Budgets and set realistic and achievable targets for the year. 
  • Get rid of can’t pay/won’t pay customers. 
  • Review debtors list and chase up overdue invoices. 

Friday, August 12, 2011

Financing a vehicle purchase

When purchasing a vehicle for your business, there are many different financing options. While they might look similar, each one has benefits and drawbacks, especially from a tax standpoint. Here are the most popular financing options. Please note that VAT on cars is recoverable only in very rare circumstances. For other vehicles (and other asset classes for that matter), the VAT is fully recoverable as per described below.


Outright Buy

Obviously this is the simplest option when you don't need any financing or when the financing is provided separately (with a line of credit for example). From an accounting viewpoint the actual cost of the vehicle is capitalised in the balance sheet and an annual charge for depreciation is shown in the accounts as an expense in the profit and loss account. This therefore has the effect of showing the asset in the balance sheet at cost, reduced by the cumulative charge for depreciation. The annual depreciation charge is calculated in accordance with accounting standards, based on the useful economic life of the asset and the residual value.

Tax wise, you will be allowed capital allowance deductions. Those depend on the type of vehicle and the tax year (as the rules tend to change quite often). Usually your accountant will do that for you. As for VAT, unless the vehicle is a car, it will be recovered in full (with a delay of four months however).