Income Tax Act 2007 section 389

Eligibility requirements for interest on loans within section 388

Section 389 sets out the conditions that must be met for interest on a loan used to buy plant or machinery for partnership use to qualify for income tax relief.

• Two conditions must both be satisfied: the interest must be paid by an individual who is a member of the relevant partnership (Condition A), and the interest must fall due within 3 years of the end of the period of account in which the loan was made (Condition B).
• Where the plant or machinery is used partly for partnership trade, professional or property business purposes and partly for other purposes, only a proportion of the interest qualifies for relief.
• The proportion eligible for relief is determined on a just and reasonable basis, taking into account all relevant circumstances and in particular the extent of non-business use.
• Both conditions are assessed by reference to the circumstances at the time the interest is actually paid.