HS340 Interest and alternative finance payments eligible for relief on qualified loans and alternative financial arrangements (2021)

You cannot claim relief for interest on overdrafts or credit cards. buy equipment or machinery for use in your work for your employer, or by a partnership (unless you’ve already deducted the interest as a business expense) – relief is only available if you, or the partnership, were entitled to claim capital allowances on the item(s) in question – if the equipment or machinery was used only partly for your employment, or only partly for the partnership business, only the business proportion of the loan interest or alternative finance payments qualifies for relief) If you’re not sure whether you can claim relief for any interest paid or alternative finance payments, ask HMRC or your tax adviser.

You may be able to claim relief for interest paid or for alternative finance payments where the loan or alternative finance arrangement is used to: You can also claim relief for alternative finance payments paid on a qualifying alternative finance arrangement on the same basis as someone claiming relief for interest paid on a loan.

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buy ordinary shares in, or lend money to, a close company in which you own more than 5% of the ordinary share capital on your own or with associates
buy ordinary shares in, or lend money to, a close company in which you own any part of the share capital and work for the greater part of your time in the management and conduct of the company’s business, or that of an associated company
acquire ordinary share capital in an employee controlled company if you are a full-time employee – we regard you as a full-time employee if you work for the greater part of your time as a director or employee of the company or of a subsidiary in which the company has an interest of 51% or more
acquire a share or shares in, or to lend money to, a co-operative which is used wholly and exclusively for the purposes of its business
acquire an interest in a trading or professional partnership (including a limited liability partnership constituted under the Limited Liability Partnership Act 2000, other than an investment limited liability partnership)
to provide a partnership, including an limited liability partnership, with funds by way of capital or premium or in advancing money, where the money contributed or advanced is used wholly for the partnership’s business – if the partnership is a property letting partnership, read information about the residential property finance costs restriction Tax relief is available for interest on loans where the borrowed money is used for certain specific purposes.

For more information on the residential property finance costs restriction, see changes to tax relief for residential landlords. For more information on what is meant by residential property, see the Property Income Manual. Where those funds are used for residential property, for the tax year 6 April 2020 to 5 April 2021 you cannot claim relief for the cost of getting a loan, or alternative finance, and any interest on such a loan or alternative finance payments. This will be used to calculate a reduction in your Income Tax in box 12.

If you are claiming tax relief for interest payable on a loan or alternative finance arrangement to provide funds to a partnership, then relief for the interest is restricted to the extent that the partnership uses those funds for any part of its property business that consists of residential properties. 1.1 Residential property finance costs restriction

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HS340 Interest and alternative finance payments eligible for relief on qualified loans and alternative financial arrangements (2021)
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