Income Tax (Earnings and Pensions) Act 2003 section 284

Bridging loan expenses

Section 284 deals with the tax treatment of bridging loan interest when an employee relocates and needs to fund the purchase of a new home before the sale proceeds from their old home become available.

• Bridging loan interest may qualify for relief where an employee sells an old residence and buys a new one due to a job-related move, and needs temporary finance because the purchase costs arise before the sale proceeds are received.
• The loan interest only qualifies to the extent the loan is used to acquire the new residence or to repay a mortgage on the old residence — any portion used for other purposes is excluded.
• If the total loan exceeds the market value of the employee's interest in the old residence at the time the new residence is acquired, the interest on the excess is not eligible — and where the loan also serves other purposes, an apportionment formula (the smaller of market value divided by total loan, or the qualifying portion divided by total loan) determines the eligible fraction of interest.
• References to loans raised by the employee and to holding, disposing of, or acquiring an interest in a residence extend to cover the same actions taken by members of the employee's family or household, whether acting alone or jointly with the employee.