Borrowing to buy plant or machinery for partnership use - introduction
When a partnership business is growing it may be the case that an individual partner may be able to access funds more easily than the partnership. In that case, a partner may decide to take out a loan to purchase an item of plant or machinery for use by the partnership. In certain circumstances, relief for the interest paid on the loan may be given against the partner's personal liability to tax.
Income Tax Act 2007 provides for relief to be given to a person who pays interest on certain loans, including a loan to buy plant or machinery that is used by a partnership. An individual who is a member of a partnership can claim relief for the interest paid on a loan to buy plant or machinery that is owned by the partner but is not partnership property and is used in the partnership's trade, profession or ordinary property business.
There are several conditions that have to be met to claim the relief and the amount of the relief may be restricted in certain circumstances.
The relief can be given for the year in which the loan is first applied and in the following three years.
Print this page for your records