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HMRC internal manual

Employment Income Manual

HM Revenue & Customs
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Removal or transfer costs: expenses and benefits to which Section 271 ITEPA 2003 applies: bridging loans: loans not provided by the employer

Section 284 ITEPA 2003

Reimbursed bridging loan interest is eligible for exemption where:

  • the employee, or
  • the employee and one or more members of his or her family or household (see EIM20504), or
  • one or more members of the employee’s family or household

(a) disposes of an interest in the old home and acquires an interest in the new home and

(b) has to take out a loan to bridge the gap between the date when the interest in the new property is acquired and the date when the sale proceeds of the old property are available and

(c) uses the loan only to redeem loans relating to the old home or to acquire the new home. A loan relates to the old home if it was raised to acquire the property, for example a mortgage, or if it was secured on the property, for example a home improvement loan, and

(d) the loan does not exceed the market value of the old home at the time the new home is acquired.

Where the bridging loan is not provided or facilitated by the employer and the conditions at (a), (b), (c) and (d) above are satisfied, the interest on the loan is an eligible expense. If either or both of the conditions at (c) and (d) are not met the eligible interest is restricted. The eligible amount is the interest payable on the proportion of the loan that meets both conditions.

For further guidance see the example at EIM03122.