Income Tax Act 2007 section 399

Eligibility requirements for interest on loans within section 398

Section 399 sets out the two conditions that must both be satisfied before an individual can claim income tax relief on interest paid on a loan used to invest in a partnership.

• The individual must have been an active (non-limited) partner in the partnership continuously from the time the loan was used until the interest is paid, and must not be a limited partner in a registered limited partnership or a member of an investment LLP.
• During that same period the individual must not have recovered any capital from the partnership, other than amounts already treated as a repayment of the loan under the recovery-of-capital rules in section 406.
• Where the partnership is a film partnership to which section 400 applies, relief is restricted to only 40% of the interest that would otherwise qualify.
• Certain senior employees of a professional partnership who deal independently with clients and are indistinguishable from partners in their client relationships are treated as partners for the purposes of these rules.