Qualifying loans (480: Appendix 5)
Find out about loans that count as qualifying loans.
The following is a brief summary of loans which count as qualifying loans (see chapter 17, paragraph 17.14).
- Any loan or form of credit interest which is (or would be if any were paid) deductible in whole or part in computing the profits of a trade, profession or vocation carried on in the UK by the borrower.
- Any loan the interest on which is (or would be if any were paid) deductible in whole or in part in computing the profits of a property income business carried on in the UK by the borrower.
- Any loan (other than an overdraft or credit card account) made to the personal representatives of a deceased person before the grant of representation to pay Capital Transfer Tax or Inheritance Tax on the personal property of the deceased. Such a loan will cease to be ‘qualifying’ one year after it’s taken out.
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Any loan (other than an overdraft or credit card account) to an individual used for purchase of:
(a) An interest in a partnership, or contribution of capital or advance to a trading or professional partnership, in which (in either case) the borrower is an active participant.
(b) Ordinary share capital in a close company or making a loan of money to such a company for use in its business, or in an associated company’s business, provided the borrower either owns more than 5% of the ordinary share capital or owns some share capital and works in the management of the company for the greater part of their time.
(c) Shares in an employee controlled company, that’s, a company in which at least 50% of the issued ordinary share capital and voting power is beneficially owned by full-time employees. The company must be a trading company or the holding company of a trading group and must be unquoted and resident in the UK. -
Any loan (other than an overdraft or credit card account) used to pay off a loan within 2, 3 or 4 above.
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Any loan (other than an overdraft or credit card account) used by the holder of an office or employment to buy machinery used in his work. Such a loan will cease to be ‘qualifying’ on the third anniversary of the end of the year of assessment in which it’s taken out.
- Any loan (other than an overdraft or credit card account) made before 9 March 1999 and used by an annuitant who’s 65 years of age or older to purchase a life annuity, provided the loan is secured on property which is the borrower’s main residence.