Part 8

Other reliefs
Chapter 1

Interest payments

Loans for investing in partnerships

Eligibility requirements for interest on loans within section 398
399
1
Interest on a loan within section 398 to an individual is eligible for relief only if conditions A and B are met.
2
Condition A is that throughout the period from the use of the loan until the interest is paid the individual has been a member of the partnership otherwise than—
a
as a limited partner in a limited partnership registered under the Limited Partnerships Act 1907 (c. 24), or
b
as a member of an investment LLP.
3
Condition B is that in that period the individual has not recovered any capital from the partnership, apart from any amount taken into account under section 406(2) (recovered capital that is treated as a repayment of the loan).
4
If section 400 (film partnerships) applies in a tax year, only 40% of the interest that would otherwise be eligible for relief for that year is eligible.
5
For the purposes of subsection (2) an individual who is not a member of a partnership is treated as such a member if—
a
the partnership carries on a profession,
b
the individual is employed by the partnership in a senior capacity, and
c
the individual is allowed—
i
to act independently in dealing with clients of the partnership, and
ii
to act generally in such a way as to be indistinguishable from the partners in relations with those clients.
6
For the purposes of subsection (2) “investment LLP” means a limited liability partnership—
a
whose business consists wholly or mainly of the making of investments, and
b
the principal part of whose income is derived from investments,
and whether a limited liability partnership is an investment LLP is determined for each period of account of the partnership.