Income Tax Act 2007 section 384

General restrictions on relief under Chapter

Section 384 sets out two general restrictions that limit when income tax relief can be claimed for interest paid on certain types of borrowing.

• No relief is available for interest arising on overdrawn bank accounts or credit card debts (or similar arrangements)
• Where interest paid on a loan exceeds a reasonable commercial rate, relief is denied on the excess amount
• The reasonable commercial rate is assessed over the life of the loan from inception to the end of the relevant tax year (or part-year if the loan does not span the full year)
• Any interest previously disallowed as excessive ("unrelieved interest") is excluded when calculating whether the cumulative interest represents a reasonable commercial rate