Section 248 Relief to individuals on loans applied in acquiring interest in companies
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(1) This section shall apply to a loan to an individual to defray money applied-
(a) in acquiring any part of the ordinary share capital of-
[(i) a company which exists wholly or mainly for the purpose of carrying on a trade or trades,]1 or
(ii) a company whose business consists wholly or mainly of the holding of stocks, shares or securities of a company referred to in subparagraph (i),
(b) in lending to such a company referred to in paragraph (a) money which is used wholly and exclusively for the purpose of the trade or business of the company or of a connected company, or
(c) in paying off another loan where relief could have been obtained under this section for interest on that other loan if it had not been paid off (on the assumption, if the loan was free of interest, that it carried interest).
Amendments
1 Para (a)(i) substituted by Finance Act 2006 section 9(a) as respects a loan made after 7 December 2005.
(1A) Subsection (1)(c) shall not apply to a loan made after 7 December 2005 which is applied in paying off another loan applied in acquiring ordinary share capital in, or making a loan to, a company whose income consists wholly or mainly of profits or gains chargeable under Case V of Schedule D unless-
(a) the loan does not exceed the balance outstanding on, and
(b) the term of the loan does not exceed the balance of the term of,
the loan being paid off.
Amendments
Subs (1A) inserted by Finance Act 2006 section 9(b).
Can I obtain relief on interest on a loan to buy shares in a property rental company?
(1)-(1A) Where you use interest on borrowings to pay off an existing loan that was used to buy shares in, or lend money to, a property rental company, such interest is not deductible since 7 December 2005 - unless the loan merely replaces existing bo...
(2) Relief shall be given in respect of any payment of interest by the individual on the loan if-
(a) when the interest is paid the individual has a material interest in the company or in a connected company,
(b) during the period taken as a whole from the application of the proceeds of the loan until the interest was paid, the individual has worked for the greater part of his or her time in the actual management or conduct of the business of the company or of a connected company, and
(c) the individual shows that in the period referred to in paragraph (b) he or she has not recovered any capital from the company or from a connected company, apart from any amount taken into account under section 249.
(3) Relief shall not be given in respect of any payment of interest by an individual on a loan applied on or after the 24th day of April, 1992, for any of the purposes specified in subsection (1) unless the loan is applied for bona fide commercial purposes and not as part of a scheme or arrangement the main purpose or one of the main purposes of which is the avoidance of tax.
(4) Subsection (1) shall not apply to a loan unless it is made in connection with the application of the money and either on the occasion of its application or within what is in the circumstances a reasonable time from the application of the money, and that subsection shall not apply to a loan the proceeds of which are applied for some other purpose before being applied as described in that subsection.
Is there a time limit between obtaining a loan and investing it in a company?
(4) You must invest the loan advance immediately or within a reasonable time. If the loan advance is used for some other purpose before being invested in the company, no interest relief is given. However, the placing of a loan advance on temporary de...
(5) Interest eligible for relief under this section shall be deducted from or set off against the income of the borrower for the year of assessment in which the interest is paid and tax shall be discharged or repaid accordingly, and such interest shall not be eligible for relief under any provision of the Income Tax Acts apart from this section.
