Income Tax Act 2007 section 352

No acquisition of share in partnership

Section 352 prevents an investor from claiming Community Investment Tax Relief on capital contributed to a Community Development Finance Institution (CDFI) that is structured as a partnership.

• Where a CDFI is a partnership, the qualifying investment cannot include capital the investor contributes on becoming a partner
• This restriction covers both straightforward capital contributions and amounts dressed up as loan capital
• If loan capital provided by the investor is accounted for as partners' capital in the partnership accounts, it is treated as a capital contribution
• The effect is that joining a CDFI partnership as a member does not, in itself, create a qualifying investment for tax relief purposes