Finance Act 1995

2 (1) This paragraph applies where, in the case of a trade or profession carried on by persons in partnership—

(a) paragraph 2(2) of Schedule 20 to the Finance Act 1994 applies without the modification made by paragraph 2(3) of that Schedule;

(b) a claim is made under section 353 of the Taxes Act 1988 (relief for interest: general provision) in respect of interest on a loan to defray money contributed or advanced by a partner to the partnership; and

(c) sub-paragraph (2) below applies to any of the money so contributed or advanced.

(2) This sub-paragraph applies to money so contributed or advanced unless it was contributed or advanced wholly or mainly—

(a) for bona fide commercial reasons; or

(b) for a purpose other than the reduction of the partnership’s borrowings for a relevant period.

(3) Subject to sub-paragraph (4) below, the amount eligible for relief under the said section 353 in respect of interest paid by the partner in respect of the transitional period on money to which sub-paragraph (2) above applies shall not exceed the appropriate percentage of that interest.

(4) Sub-paragraph (3) above does not apply where—

(a) the loan was made before 1st April 1994; or

(b) the aggregate amount of interest paid as mentioned in that sub-paragraph is less than such amount as may be prescribed by regulations made by the Board.

(5) Where relief under the said section 353 in respect of interest on any loan (“the original loan”) is restricted by sub-paragraph (3) above, relief under that section in respect of interest on any other loan used to defray money applied in paying off the original loan shall be restricted to the same extent as if that other loan were the original loan.

(6) In this paragraph—

• “the appropriate percentage” and “the transitional period” have the same meanings as in paragraph 1 above;

• “relevant period” means a period the whole or part of which falls within the transitional period.