Qualifying loan interest

A client took out finance to buy into a partnership. The interest on this loan is qualifying loan interest and therefore tax deductible. The partnership has now been incorporated into a Limited company. How does this effect the loan interest?

Tax relief is available for interest on loans where the borrowed money is used for reasons including acquiring an interest in a trading or professional partnership, including a Limited Liability Partnership and to buy ordinary shares in a close company in which you own any part of the share capital. Meaning both situations separately fall under qualifying loan interest. But how about the original finance when the partnership incorporates?

ITA07/S410 ensures continuity of relief where a partnership is incorporated into a close company, an employee-controlled company or co-operative. Under ITA07/S410 the original loan is treated as if it were made at the time of the succession or reorganisation. This rule ensures the original loan continues to be qualifying loan interest and tax deductible now the partnership has been incorporated into a Limited company.

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