PIM2060 - Deductions: interest: further restrictions of relief for interest on a loan used to invest in a property partnership
Income Tax Act 2007 (ITA07) sections 383(1), 398 and 399
Individuals may claim relief against taxable income for interest on loans taken out to invest in a partnership (ITA07/S383(1) and S398). That relief is also subject to restriction, where the partnership in question carries on a property business which includes the letting of a dwelling-house or part of a dwelling house (ITA07/S399A and 399B). See PIM2058.
The restriction applies to the proportion of interest paid which can (on a just and reasonable basis) be attributed to the dwelling-house letting element of the partnership바카라 사이트™s whole business.
Basic rate tax reducer
The individual is entitled to deduct from his tax liability, the proportion of the interest which would by relievable under ITA07/S383(1) were it not for the restriction imposed by ITA07/S399A, multiplied by the basic rate of tax.
Example
In the tax year 2020/21, Jo pays loan interest of £10,000 on a loan which she has taken out to invest in a property-letting partnership. The partnership owns a block of residential flats which are let to tenants, and its whole property business relates to those lettings.
Under ITA07/S383(1) and S398 Jo would be entitled to deduct the £10,000 from her income, before calculating her income tax liability for the year.
ITA07/S399A prevents the relief from being deducted from Jo바카라 사이트™s income. Instead, the basic rate of tax is applied to the £10,000, and the resulting sum is deducted from Jo바카라 사이트™s tax liability.