SE32860 - Other expenses: interest paid

Section 359(3) and (4) ICTA 1988

An employee is entitled to relief for interest paid on a loan to purchase machinery and plant if capital allowances are due in respect of that purchase. The conditions that must be met are listed at RE402.

The conditions that must be met before an employee is entitled to capital allowances on machinery and plant are explained at SE36500.

If the machinery and plant is used partly for business purposes the relief for interest should be restricted to the same extent as the capital allowances are restricted. This is illustrated by example SE32861.

If the employee uses the authorised mileage rates for years up to 2001/02 to calculate his or her motoring expenses, see SE31860, they may claim relief in addition for the business proportion of the interest on a loan to purchase the vehicle. The relief is given against general income and not as a deduction in computing the fixed profit. There is a time limit, see SE31890.

For cars acquired under a hire purchase agreement, see SE31855.

Employees are not entitled to loan interest relief for a car, van, motor cycle or bicycle after 5 April 2002. This is because employees are no longer entitled to capital allowances after that date, see SE36520. For 2002/03 onwards relief for the costs of using their own vehicle for business travel can only be given by mileage allowance relief, see SE31330 onwards.