[Income tax: relief for interest payments](https://library.croneri.co.uk/etc/qo-schri-1)

1. [Key points](https://library.croneri.co.uk/cch_uk/etc/3100)

1.1. Income tax relief for interest paid on qualifying loans

1.2. Payments deducted from taxable income

1.3. Categories of qualifying loans

1.4. Recovery of capital treated as repayment

2. [Recovery of capital](https://library.croneri.co.uk/cch_uk/etc/3150)

2.1. Capital recovered but not used to repay loan

2.2. Loan deemed to be repaid by amount recovered

2.3. Interest relievable reduced by amount of capital recovered

2.4. Treated as a recovery of capital

2.4.1. Company repays loan

2.4.2. Partnership returns capital

2.4.3. Consideration received for the sale, exchange or assignment of shares or partnership interest

3. [Qualifying loans](https://library.croneri.co.uk/cch_uk/etc/3105)

3.1. Loan to buy plant and machinery

3.1.1. Money borrowed by employee

3.1.2. Used to buy plant and machinery to use in their employment

3.1.3. Only interest paid in the year of the loan and the following 3 years qualifies

3.2. Loan to invest in a close company

3.2.1. Used to acquire ordinary shares is a qualifying close company

3.2.2. To lend to the company for use wholly and exclusively for the business

3.2.3. To satisfy an earlier qualifying loan

3.3. Loan to invest in a partnership

3.3.1. Used to acquire a share in a partnership

3.3.2. To contribute capital or advance money to be used wholly for business purposes

3.3.3. To pay off another qualifying loan

3.4. Loan to invest in an employee-controlled company

3.4.1. Used to acquire ordinary shares in the company

3.4.2. To pay off another qualifying loan

3.5. Loan to acquires shares in a cooperative or its subsidiary

3.6. Loan to pay inheritance tax

3.6.1. Used to pay before grant of representation

3.6.2. Used to pay off another qualifying loan

3.6.3. Only interest paid in the first year of making the loan eligible for relief

3.6.4. If income insufficient to claim relief in full, relief may be given in other tax years

3.6.4.1. Preceding tax years, latest year first

3.6.4.2. Succeeding tax years if any still unrelieved