Anti-avoidance and interest relief
New legislation is to be introduced designed to block interest relief on certain loans used to invest in partnerships or small companies. There are a number of avoidance schemes which take advantage of rules designed to encourage investment in small companies and partnerships. In the avoidance schemes the loan is structured so that after the availability of the interest relief is taken into account an investor cannot fail to make a profit.
The new legislation will ensure that no interest relief will be available if the loan is made as part of arrangements that are certain to produce a profit for an investor by virtue of the interest being eligible for relief.
Genuine commercial investments in small businesses and partnerahips where there is an uncertainty to the returns that will be produced are not the subject of the new legislation.