PT7 Deductible Payments

Question 1

Deductible payments are deducted in arriving at net income, primarily from non-savings income.

The cap on the total amount of certain reliefs including qualifying loan interest which can be deducted to arrive at taxable income is …..

Answer 1

the greater of:
* £50,000; or
* 25% of adjusted total income

Question 2

The most important type of deductible payment is interest on qualifying loans. How does this work?

Answer 2

Interest on qualifying loans is paid gross and the gross amount is deducted in the tax computation.

Question 3

Qualifying interest includes interest on the following types of loan:

Answer 3

• Loan taken out by an employee to buy plant and machinery (this does not include a loan to buy a car).
• Loan to buy shares in a close company/provide funds to a close company.
• Loan to buy shares in an employee-owned company.
• Loan to buy into a partnership

Question 4

If the taxpayer recovers capital in respect of the asset for which the loan was taken out, such as by selling the shares…..

Answer 4

they are deemed to have used the capital recovered to
repay the loan, thereby restricting the interest relief from that point onwards