Finance Act 1982

PART I Relevant Loan Interest

Interpretation

1 In this Schedule—

• " the 1967 Act " means the [1967 c. 29.] Housing Subsidies Act 1967 ;

• "the 1972 Schedule" means Schedule 9 to the [1972 c. 41.] Finance Act 1972 (relief for interest on loans for purchase or improvement of land etc.);

• " the 1974 Schedule" means Schedule 1 to the [1974 c. 30.] Finance Act 1974 (modification of rules for relief for interest) ;

• " the 1981 Order " means the [S.I. 1981/156 (N.I. 3).] Housing (Northern Ireland) Order 1981 ;

• " notice " means notice in writing ;

• "prescribed", except in Part IV, means prescribed by the Board;

• " the principal section " means section 26 of this Act; and

• " regulations" means regulations made by the Board under section 29 of this Act.

Qualifying conditions

2 (1) Subject to the following provisions of this Schedule, interest which is paid and payable in the United Kingdom to a qualifying lender and to which sub-paragraph (2) or sub-paragraph (3) below applies is " relevant loan interest",

(2) This sub-paragraph applies to interest if—

(a) it is interest falling within paragraph 1 of the 1972 Schedule (interest on loans for purchase or improvement of land) or paragraph 24 of the 1974 Schedule (interest on loans to purchase life annuities) ; and

(b) apart from subsection (1) or subsection (8) of the principal section and, where applicable, paragraph 5 or paragraph 24(3) of the 1974 Schedule (the tax relief limit) the whole of the interest either would be eligible for relief under section 75 of the [1972 c. 41.] Finance Act 1972 or would be taken into account in a computation of profits or gains or losses for the purposes of Case I, Case II or Case VI of Schedule D for any year of assessment; and

(c) except in the case of interest falling within paragraph 24 of the 1974 Schedule, at the time the interest is paid, the condition in either paragraph 4 or paragraph 4A of the 1974 Schedule is fulfilled with respect to the land, caravan or houseboat to which the loan concerned relates ;

but, unless sub-paragraph (4) or sub-paragraph (5) below applies, this sub-paragraph does not apply to interest which becomes due before 6th April 1983.

(3) This sub-paragraph applies to interest which becomes due on or after 1st April 1983 and is payable on a loan—

(a) in respect of which there is in force on 31st March 1983—

(i) an option notice given under section 24(2) of the 1967 Act (option mortgages), other than one falling within section 27(3)(b) of this Act; or

(ii) an option notice given under Article 142(2) of the 1981 Order (option mortgages in Northern Ireland), other than one falling within section 27(4)(b) of this Act; and

(b) which relates to a dwelling in respect of which, at the time the interest is paid, the condition in paragraph 4 of the 1974 Schedule is fulfilled.

(4) Sub-paragraph (2) above applies to interest which becomes due on or after 1st April 1983 (instead of 6th April 1983) if the qualifying lender to whom it is payable is either a building society, within the meaning of the [1962 c. 37.] Building Societies Act 1962 or the [1967 c. 31 (N.I.).] Building Societies Act (Northern Ireland) 1967, or a local authority.

(5) If an application in that behalf is made to the Board by a qualifying lender, sub-paragraph (2) above applies to interest which becomes due on or after such date as may be specified by the Board for the purposes of that sub-paragraph (instead of 6th April 1983).

(6) The Board shall not under sub-paragraph (5) above specify a date earlier than 1st March 1983 or later than 5th April 1983 and the Board shall notify the qualifying lender concerned of the date specified under that sub-paragraph.

(7) Sub-paragraph (2) above does not apply to interest payable on a loan the only security for which is a contract of insurance on human life or a contract to pay an annuity on human life.

3 (1) In determining whether sub-paragraph (2) of paragraph 2 above applies to any interest, paragraph 1 of the 1972 Schedule and paragraph 24 of the 1974 Schedule shall each have effect as if the words " or the Republic of Ireland " were omitted.

(2) In determining whether sub-paragraph (2)(c) of paragraph 2 above applies to any interest, sub-paragraph (1) of paragraph 4 of the 1974 Schedule (restrictions on reliefs under the 1972 Schedule) shall have effect as if—

(a) in paragraph (a) after the word " used ", where it first occurs, there were inserted the words " wholly or to a substantial extent "; and

(b) paragraph (6) (commercial lettings) and the word "or" immediately preceding it were omitted.

(3) In determining for the purposes of paragraph 2(3)(b) above whether the condition in paragraph 4 of the 1974 Schedule is for the time being fulfilled with respect to any dwelling.—

(a) sub-paragraph (1) of that paragraph shall have effect as if for the words from " Part I of Schedule 9" to " used " (where it first occurs) there were substituted the words " interest shall not be relevant loan interest for the purposes of section 26 of the Finance Act 1982 unless the dwelling to which the loan relates is at the time the interest is paid used wholly or partly " and paragraph (b) and the word " or " immediately preceding it were omitted ; and

(b) sub-paragraph (3) of that paragraph shall have effect as if for the words " land, caravan or house-boat" there were substituted the word " dwelling ".

(4) Where at a time when interest on a loan (in this sub-paragraph referred to as " the first loan ") is relevant loan interest, the borrower raises another loan to defray money to be applied as mentioned in paragraph 1 of the 1972 Schedule with a view—

(a) to the use of other land or another caravan or house-boat wholly or partly as that person's only or main residence, and

(b) to the disposal of the land, caravan, house-boat or dwelling to which the first loan relates,

then, in relation to interest payable within twelve months from the making of the other loan, the condition in paragraph 4 of the 1974 Schedule shall be treated as continuing to be fulfilled.

(5) If in a case falling within sub-paragraph (4) above, the interest on the first loan referred to in that sub-paragraph is interest to which paragraph 2(2) above applies and a direction is given under paragraph 6 of the 1974 Schedule extending the period within which Part I of the 1972 Schedule applies to that first loan, sub-paragraph (4) above shall have effect in relation to that case as if for the reference to twelve months there were substituted a reference to such longer period as is specified in the direction.

(6) If, in a case falling within sub-paragraph (4) above, the interest on the first loan is interest to which paragraph 2(3) above applies and, having regard to the circumstances of that case, it appears to the Board reasonable to do so, they may direct that, in relation to that case, that sub-paragraph shall have effect as if for the reference to twelve months there were substituted a reference to such longer period as meets the circumstances of that case.

4 (1) Notwithstanding anything in paragraph 2 above, interest on a home improvement loan is not relevant loan interest unless—

(a) the qualifying lender to whom the interest is payable is a building society, within the meaning of the [1962 c. 37.] Building Societies Act 1962 or the [1967 c. 31 (N.I.).] Building Societies Act (Northern Ireland) 1967, or a local authority or the Northern Ireland Housing Executive ; or

(b) the qualifying lender to whom the interest is payable has given notice to the Board in accordance with regulations that he is prepared to have those home improvement loans in respect of which he is the lender and which were made after such date as he may specify in the notice brought within the tax deduction scheme.

(2) A qualifying lender may not specify a date in a notice under sub-paragraph (1) above which is earlier than the earliest date on which paragraph 2 above applies to interest on any loan (whether or not a home improvement loan) made by him.

(3) In this paragraph " home improvement loan" means a loan made to defray money applied wholly in improving or developing land or buildings on land or in paying off another loan which was itself to defray money so applied.

(4) Paragraphs 3 and 4 of the 1972 Schedule (construction of references to money applied in improving or developing land or buildings) shall apply for the purposes of this paragraph as they apply for the purposes of Part I of that Schedule.

Loans over the tax relief limit

5 (1) The provisions of this paragraph have effect in relation to a loan where, by virtue of sub-paragraphs (1) and (2) of paragraph 5 or paragraph 24(3) of the 1974 Schedule (the limit on eligibility for tax relief), only part of the interest on the loan would (apart from the principal section) be eligible for relief under section 75 of the [1972 c. 41.] Finance Act 1972; and in this paragraph any such loan is referred to as a " limited loan ".

(2) None of the interest on a limited loan is relevant loan interest unless the qualifying lender to whom the interest is payable has given notice to the Board in accordance with regulations that he is prepared to have limited loans of a description which includes that limited loan brought within the tax deduction scheme.

(3) If, in a case where sub-paragraph (2) above applies, paragraph 5(2) of the 1974 Schedule requires another loan to be taken into account for the purpose of determining that part of the limited loan interest on which would (apart from the principal section) be eligible for relief as mentioned in sub-paragraph (1) above, none of the interest on the limited loan is relevant loan interest unless that other loan was made by the same qualifying lender as the limited loan.

(4) Where notice has been given as mentioned in sub-paragraph (2) above and, if sub-paragraph (3) above also applies, the condition in that sub-paragraph is fulfilled only so much of the interest as (apart from the principal section) would be eligible for relief under section 75 of the [1972 c. 41.] Finance Act 1972 is relevant loan interest.

Joint borrowers

6 (1) Where a loan on which interest is payable by the borrower was made jointly to the borrower and another person who is not the borrower's husband or wife, the interest on the loan is not relevant loan interest unless—

(a) each of the persons to whom the loan was made is a qualifying borrower; and

(b) in relation to each of them considered separately, the whole of that interest is relevant loan interest, in accordance with the preceding provisions of this Part of this Schedule.

(2) References in this paragraph to the borrower's husband or wife do not include references to a separated husband or wife, and for this purpose " separated " has the same meaning as in Part II of the 1974 Schedule.