RE402 - Interest paid: Loans for other purposes: Interest on loans to buy machinery or plant

ICTA88/S359 (1)-(4)

An employee, office holder or partner in a firm can claim relief for the interest paid on a loan to buy a car or other machinery or plant for use in carrying out the duties of the office.

Check that these conditions are satisfied before you give relief.

• The borrower or firm is entitled to capital allowances or liable to a balancing charge in respect of the car, machinery or plant. You may have to ask an Inspector to check this or
• • the borrower is an employee or office holder entitled to capital allowances or liable to a balancing charge or would be but for the amount of the employer's contribution to wear and tear of the car etc. Instructions about employer's contributions to wear and tear are at SE4856.

• The interest is due and payable by the end of the third year of assessment following the year of assessment in which the loan was taken out.
• The car or other machinery or plant is used wholly or partly for the purposes of the employment, office or business.

Where the conditions are met give relief for the full interest paid if the car or other is used only for employment, office or business purposes. If it is used partly for some other purpose restrict the relief by the non-business use. Do this by applying the same private use fraction as in the capital allowances computation.