Commentary

E1.831 Qualifying loan interest—restriction of relief where capital recovered by individuals

Personal and employment tax

E1.831 Qualifying loan interest—restriction of relief where capital recovered by individuals

E1.831 Qualifying loan interest—restriction of relief where capital recovered by individuals

Introduction

The commentary below discusses the restriction of income tax relief for interest paid by an individual where capital is directly or indirectly recovered from the business to which it has been contributed. 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.

Restriction of relief where capital recovered

Relief may be restricted or discontinued if the investor recovers any amount of capital from the business at any time after the loan is used.

These capital recovery rules must be considered in relation to the following qualifying loans1:

  1.  

    •     loans to buy an interest in a close company taken out by an individual, see E1.8272

  2.  

    •     loans to buy an interest in an employee-controlled company taken out by an individual, see E1.827A3

  3.  

    •     loans to invest in a partnership taken out by an individual, see E1.827B4

  4.  

    •     loans to invest in a co-operative taken out by an individual, see

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