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Avoidance: MiscellaneousFilm partnerships75Interest relief: film partnership
(1) The amount of interest on a loan in respect of which an individual (“the borrower”) is eligible for relief for a year of assessment under sections 353 and 362 of ICTA (interest on loan to buy into partnership) shall, where this section applies, be restricted to 40% of the interest that would otherwise be eligible for relief.
(2) This section applies where—
(a) the partnership (“the film partnership”) carries on a trade,
(b) the profits or losses of the trade are computed in accordance with Chapter 9 of Part 2 of ITTOIA 2005 (films, etc),
(c) the loan is secured on an asset or activity of another partnership (“the investment partnership”),
(d) the borrower is or has been a member of the investment partnership, and
(e) at a time in the year of assessment the proportion of the profits of the investment partnership to which the borrower is entitled is less than the proportion of the partnership's capital contributed by him at that time.
(3) For the purposes of subsection (2)(c) a loan is secured on an asset or activity of a partnership if there is any arrangement—
(a) under which an asset of the partnership may be used or relied upon wholly or partly to guarantee repayment of any part of the loan, or
(b) by virtue of which any part of the loan is expected to be repaid (directly or indirectly) out of assets or income held by or accruing to the partnership.
(4) For the purposes of subsection (2)(e) the reference to profits excludes any amount that would not be taken into account as, or for the purpose of calculating, income for the purposes of the Tax Acts.
(5) In subsection (2)(e) the reference to the partnership's capital is a reference to—
(a) anything that is, or in accordance with generally accepted accounting practice would be, accounted for as partners' capital or partners' equity, and
(b) amounts lent to the partnership by the partners.
(6) For the purposes of subsection (2)(e) the reference to the proportion of the partnership's capital contributed by the borrower includes, in particular, a reference to—
(a) any amount paid by the borrower to acquire an interest in the investment partnership if or in so far as the borrower retains the interest at that time,
(b) any amount made available by the borrower (directly or indirectly) to another person who acquires an interest in the investment partnership if or in so far as that other person retains the interest at that time,
(c) any amount lent by the borrower to the investment partnership,
(d) any amount made available by the borrower (directly or indirectly) to another person who lends it to the investment partnership, and
(e) an amount made available in any other way prescribed by regulations made by the Commissioners for Her Majesty's Revenue and Customs.
(7) Regulations under subsection (6)(e)—
(a) may make provision having retrospective effect,
(b) may make provision generally or only in relation to specified cases or circumstances,
(c) may make different provision for different cases or circumstances,
(d) may make transitional, consequential or incidental provision,
(e) shall be made by statutory instrument, and
(f) shall not be made unless a draft has been laid before and approved by resolution of the House of Commons.
(8) In subsections (2) to (6) a reference to the borrower or another partner includes a reference to a person connected with him within the meaning of section 839(2) of ICTA.
(9) This section shall have effect in relation to the payment of interest accruing on or after 10th March 2006.
This Act received Royal Assent on 19 July 2006: for provision as to the effect of this section see sub-s (9) above.