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1. I regret to say that the £43,000 loan is a claimable expense against the business income which would have been created and as such would give rise to a tax loss on your business. whether this would be able to be offset against the tax liability depends on whether the business was incorporated or not.
2. If the business was incorporated, then the loss on the business of the £43,000 loan would be offset against corporation tax. However, if the business was run with you as a sole trader, then the loss could be offset against Income Tax. However, before you would be able to offset this loss against Income Tax, you would have to enlist the services of an accountant to do up accounts for the business to prove that it actually showed a loss.
3. Be aware that HMRC don't like losses in current years Income to be set against prior years' tax liability. So you will have to pay penalties on the unpaid Income Tax due back in 2007/8. However, if you get a good tax consultant or accountant and show you don't have the means to discharge the monies, then some deal will be entered into. However, be aware that this would be in the hands of HMRC.
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