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HMRC internal manual

Savings and Investment Manual

Relief for interest paid: interest in a partnership: ‘eligibility requirements’

Eligibility for interest relief on loans to invest in a partnership

ITA07/S399 sets out two conditions for relief:

Condition A is that the individual must have been a member of the partnership throughout the period from the use of the loan until the date the interest is paid. However, Condition A is not met if the individual is a member of a partnership as:

  • a limited partner in a limited partnership registered under the Limited Partnerships Act 1907 (c 24), or
  • a member of an investment LLP

Condition B is that in the period applicable for condition A, the claimant must not have recovered any capital from the partnership, unless the capital has been used to reduce his borrowing (see SAIM10310).

Investment LLPs

An investment LLP is a limited liability partnership whose business is wholly or mainly making investments and which derives most of its income from investments. Whether a company is an investment LLP is to be decided for each period of account of the partnership. BIM72110 has more on LLPs.

Meaning of ‘partner’

Sleeping partners may claim relief provided all other conditions for relief are met.

ITA07/S399 (5) allows senior employees (salaried partners) of professional partnerships to count as partners for the purposes of this section. The employees must act independently in dealing with clients and be generally indistinguishable from the firm’s partners. (This provision was formerly set out in Statement of Practice A33).

Relief cannot be given if the individual has ceased to be a member of the partnership, even if that former partner is unable to withdraw capital immediately upon leaving the partnership.