Income Tax Act 2007 section 384B

Restriction on relief where cash basis applies

Section 384B restricts interest relief on certain partnership-related loans where the partnership uses the cash basis of accounting for its property business.

• No tax relief is available for interest paid on relevant partnership loans where the partnership's UK or overseas property business profits are calculated on the cash basis
• A loan to buy plant or machinery for partnership use is a relevant loan caught by this restriction
• A loan to invest in a partnership (but not one used to purchase a share in the partnership) is also a relevant loan caught by this restriction
• The restriction applies on a tax year basis, so relief is denied for any year in which the cash basis is used for the partnership's property business