Interest relief

Avoidance schemes have been notified to HMRC that use provisions under which individuals may claim relief for interest payments on loans used to invest in partnerships or small companies said Stephen Timms financial secretary to the Treasury in a written ministerial statement on 19 March.

Legislation will be introduced in the forthcoming Finance Bill to stop individuals using these provisions for the purposes of tax avoidance.

In future interest will not be eligible for tax relief if it is paid as part of arrangements where the deductibility of the interest means that the investor is guaranteed to make a profit.

The new measure which takes effect from 19 March 2009 will deny relief for interest if the loan is made as part of arrangements that are certain (ignoring insignificant risk) to produce a profit for the investor by virtue of the interest being eligible...