PART IIIIncome Tax, Corporation Tax and Capital Gains Tax

CHAPTER IGeneral

49Relief for interest: loans for investment in close companies

(1)

Paragraphs 9 and 10 of Schedule 1 to the M1Finance Act 1974 (relief for interest paid on loans for investment in close companies) shall have effect subject to the following provisions of this section.

(2)

In paragraph 9(1) for the words following sub-paragraph (c) there shall be substituted the words—

“and either the conditions stated in sub-paragraph (1) of paragraph 10 below or those stated in sub-paragraph (2) of that paragraph are satisfied.”.

(3)

In paragraph 10 for all the words preceding sub-paragraph (a) there shall be substituted the following words—

“(1)

The conditions first referred to in paragraph 9 above are—”

and the following shall be inserted in paragraph 10 as sub-paragraph (2)—

“(2)

The conditions secondly referred to in paragraph 9 above are-

(a)

that, when the interest is paid, the company continues to satisfy any of the conditions of paragraph 3A(2) of Schedule 16 to the M2Finance Act 1972 and the individual holds any part of the ordinary share capital of the company ; and

(b)

that in the period from the application of the proceeds of the loan to the payment of the interest the individual has worked for the greater part of his time in the actual management or conduct of the company or of an associated company of the company; and

(c)

that he shows in the period from the application of the proceeds of the loan to the payment of the interest he has not recovered any capital from the company, apart from any amount taken into account under paragraph 13 below.”

(4)

This section has effect in relation to interest paid on or after 10th March 1982.