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HMRC internal manual

Employment Income Manual

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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 EIM36500.

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 EIM32861.

Employees are not entitled to loan interest relief for a car, van, motorcycle or bicycle after 5 April 2002. This is because employees are not entitled to capital allowances after that date, see EIM36520. 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 EIM31330 onwards.