SE32681 - Corresponding payments: interest paid that is not eligible for relief under Section 353 ICTA 1988
Section 192(3) ICTA 1988
Section 353 ICTA 1988 relief
Relief for annual interest paid on loans used for a qualifying purpose is provided by Section 353 ICTA 1988. The following conditions must be satisfied. The interest must be:
- chargeable to tax on the recipient under Case III of Schedule D, or
- payable in the United Kingdom on an advance from a bank, discount house or member of the Stock Exchange in the United Kingdom or Eire (see RE330 and RE331).
Deduction provided by Section 192(3) ICTA 1988
Interest paid to a foreign lender does not qualify for relief under Section 353. However, if all the following conditions are satisfied, you should allow a deduction for the interest paid in computing the amount of the emoluments, ignoring any territorial limitations.
- An employee has paid interest out of foreign emoluments
- The interest could not have been paid out of other overseas income (see SE32665
- The loan on which the interest is payable was used for a qualifying purpose (see the list at RE330).
By claiming under Section 192(3), interest paid abroad to a foreign lender can be deducted if the loan was used, for example
- to purchase an only or main residence outside the United Kingdom, or
- to acquire an interest in a company not resident in the United Kingdom, but which would be a close company if it were so resident.
