Commentary

E1.827B Qualifying loan interest—loan to invest in a partnership

Personal and employment tax

E1.827B Qualifying loan interest—loan to invest in a partnership

E1.827B Qualifying loan interest—loan to invest in a partnership

Introduction

The commentary below discusses the income tax relief available for interest paid by to acquire an interest in a partnership, including a limited liability partnership (LLP). This should be read in conjunction with E1.820, which includes details about general restrictions that apply to all qualifying loans and the mechanism by which relief is given (including where interest paid can be treated as a trading loss).

Loan to invest in a partnership

Use of the loan

Interest paid is eligible for income tax relief where the loan to an individual is used to1:

  1.  

    (a)     purchase a share in a partnership (whether or not the share is purchased by buying out another partner or by contributing capital on admission as a partner2)

  2.  

    (b)     contribute money to a partnership as capital or a premium, or in making advances, where the money contributed or advanced is used wholly for the trade, profession or vocation, or

  3.  

    (c)     pay off another loan which qualifies for relief

Where one loan is used to pay off another, the two loans are treated as one loan3.

Interest relief may be denied where the partnership calculates its taxable profits on the cash basis. This applies to loans that fall within (b) above or replacements for such loans. The use of the cash basis by the partnership does not affect the ability of the individual to claim income tax relief for loans under (a) above or replacements for such loans. For details of the cash

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