Tax relief on a personal loan ???

Tax relief on a personal loan ???

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AndyAudi

Original Poster:

3,070 posts

224 months

Thursday 9th August 2007
quotequote all
I've been offered an investment opportunity which I am likely to take, but have the following question,

I understand I can claim tax relief on interest on loans created "within" the investement, but can I claim tax relief on a personal loan taken out solely by me for the purpose of increasing my share of the initial capital?

I've been approved for a 5yr loan at 6.2% which I think might perhaps be better than the the rates being offered to finance some of the assets (even after their tax allowance is taken into account), but have just got a little more greedy.

thewave

14,718 posts

211 months

Thursday 9th August 2007
quotequote all
AndyAudi said:
I've been offered an investment opportunity which I am likely to take, but have the following question,

I understand I can claim tax relief on interest on loans created "within" the investement, but can I claim tax relief on a personal loan taken out solely by me for the purpose of increasing my share of the initial capital?

I've been approved for a 5yr loan at 6.2% which I think might perhaps be better than the the rates being offered to finance some of the assets (even after their tax allowance is taken into account), but have just got a little more greedy.
If it's a close company, then yes you can claim tax relief on the interest on a loan used to purchase shares.


Eric Mc

122,186 posts

267 months

Thursday 9th August 2007
quotequote all
The circumstances under which an individual can claim Income Tax relief of interest on borrowings are extremely limited.

The interest on loans taken out to buy shares in businesses (whether trading limited companies or partnerships)are generally allowable providing the entity in which the investment is being made fulfills certain criteria.

AndyAudi

Original Poster:

3,070 posts

224 months

Thursday 9th August 2007
quotequote all
thewave said:
AndyAudi said:
I've been offered an investment opportunity which I am likely to take, but have the following question,

I understand I can claim tax relief on interest on loans created "within" the investement, but can I claim tax relief on a personal loan taken out solely by me for the purpose of increasing my share of the initial capital?

I've been approved for a 5yr loan at 6.2% which I think might perhaps be better than the the rates being offered to finance some of the assets (even after their tax allowance is taken into account), but have just got a little more greedy.
If it's a close company, then yes you can claim tax relief on the interest on a loan used to purchase shares.
It will most likely be in the form of a a partnership with a parnership agreement rather than a company with shares.

AndyAudi

Original Poster:

3,070 posts

224 months

Thursday 9th August 2007
quotequote all
Eric Mc said:
The circumstances under which an individual can claim Income Tax relief of interest on borrowings are extremely limited.

The interest on loans taken out to buy shares in businesses (whether trading limited companies or partnerships)are generally allowable providing the entity in which the investment is being made fulfills certain criteria.
Eric,

I would be much obliged of you could point me in the right direction for identifying that certain criteria (I've trawled through HMRC's website but not finding anything of use so far)

Eric Mc

122,186 posts

267 months

Thursday 9th August 2007
quotequote all
A loan taken out to buy capital in a partnership is one of the allowable categories. The partnership should be a normal trading partnership.
Here is what my tax guide tells me -

You are entitled to claim tax relief on a loan to buy a partnership share, to introduce capital to a partnership or to lend money to it, providing that YOU are not a limited partner pr a "partner" in an "investment" limited liability partnership (i.e. one who's business consists wholly or MAINLY of making investments) and providing you were still a partner at the time the interest was actually paid.

As I said above, the key factor is that the partnesrhip you are lending to must be involved in a "trading" activity rather than an "investment" activity.