Income Tax Act 2007 section 391

Eligibility requirements for interest on loans within section 390

Section 391 sets out the two conditions that must be satisfied before interest on a loan used to buy plant or machinery for employment use qualifies for tax relief, and explains how relief is restricted where the asset is also used for non-employment purposes.

• Two conditions must both be met: the interest must be paid by the individual who took out the qualifying loan, and the interest must fall due no later than 3 years after the end of the tax year in which the loan was made.
• Where the plant or machinery is used partly for employment and partly for other purposes, only a proportion of the interest qualifies for relief.
• The allowable proportion must be just and reasonable, determined by reference to all relevant circumstances, particularly the extent of non-employment use.
• Both conditions are assessed at the time the interest is actually paid, not when the loan was originally taken out.