RE400 - Interest paid: Loans for other purposes: Interest on loans to buy life annuities Section 365 ICTA 1988

1999/2000 and earlier years

A loan taken out to buy an annuity for the borrower's life, or the life of the borrower and one or more other person, was a qualifying loan if

• the loan was made as part of a scheme under which at least 9/10ths of the loan was used to buy the annuity;
• each annuitant was 65 or over when the loan was made;
• the loan was secured on a property in the United Kingdom or the Republic of Ireland;
• one of the annuitants had an interest in the property - see RE342;
• the property was used as the main residence of the annuitants when the interest was paid (unless the loan was made before 26 March 1974); and
• the annuity terminated on the death of the annuitant, or any surviving annuitant, and on no other event.

Where all the conditions were met and the loan was not over £30,000 give relief for the full amount of the interest paid.

Where the loan was over £30,000

• restrict relief to the interest payable on the qualifying maximum of £30,000; and
• if there was more than one annuitant give each annuitant relief on their share of the qualifying maximum.

Example A and B who are both aged 70 took out a loan of £40,000 on their residence to buy annuities ending with the life of the survivor. A paid interest of £2,400 in the year and B £1,600.

Restricted to interest paid on qualifying maximum

Relief for interest paid by A

Relief or interest paid by B

For years from 6 April 2000 see Re414