Income and Corporation Taxes Act 1988

355 Matters excluded from section 354. U.K.

(1) M1 Subject to the following provisions of this section and sections 356 to 358, section 354 shall not apply unless the land, caravan or house-boat in question—

(a) is at the time the interest is paid used as the only or main residence of the person by whom it is paid (“the borrower”) [F1 or of a dependent relative or former or separated spouse of his,] or, if the interest is paid less than 12 months after the date on which the loan is made, is so used within 12 months after that date; or

(b) is, in any period of 52 weeks comprising the time at which the interest is payable and falling wholly or partly within the year of assessment, let at a commercial rent for more than 26 weeks and, when not so let, either available for letting at such a rent or used as mentioned in paragraph (a) above or prevented from being so available or used by any works of construction or repair;

and shall in a case within paragraph (a) above apply only within the limit imposed by section [F2 356A or] 357.

(2) If it appears to the Board reasonable to do so, having regard to all the circumstances of a particular case, they may direct that in relation to that case subsection (1) above shall have effect as if for the references to 12 months there were substituted references to such longer period as meets the circumstances of that case.

[F3 (2A) Section 354 shall not apply by virtue of subsection (1)(a) above where the interest is paid on a home improvement loan unless the loan was made before 6th April 1988.

(2B) In subsection (2A) above “home improvement loan” means—

(a) a loan to defray money applied in improving or developing land or buildings on land, otherwise than by the erection of a new building (which is not part of an existing residence) on land which immediately before the improvement or development began had no building on it, or

(b) a loan replacing (whether directly or indirectly) a loan within paragraph (a) above.

(2C) Where it is proved by written evidence that a loan made on or after 6th April 1988 was made in pursuance of an offer made by the lender before that date and that the offer either was in writing or was evidenced by a note or memorandum made by the lender before that date, the loan shall be deemed for the purposes of subsection (2A) above to have been made before that date].

(3) The land, caravan or house-boat does not fall within subsection (1)(a)above by reason of its being used as the only or main residence of a dependent relative of the borrower unless it is provided rent-free and without any other considerationF4 .

(4) M2 Relief under section 353 for interest eligible for it by virtue of section 354 in a case where it is eligible only because the land, caravan or house-boat referred to in it falls under subsection (1)(b) above shall be given only against income from the letting of that or any other land, caravan or house-boat, but may, if and to the extent that such income for the year of assessment is insufficient, be given against such income for the following year, and so on, provided the first-mentioned land, caravan or house-boat continues to fall under that subsection.

(5) M3 Subsection (1)(a) of section 354 shall not apply—

(a) where the seller and purchaser are husband and wife and either sells to the other, or

(b) where the purchaser, or the wife or husband of the purchaser, has since 15th April 1969 disposed of an estate or interest in the land, or the property in the caravan or house-boat, in question, and it appears that the main purpose of the disposal and purchase was to obtain relief in respect of interest on the loan, or

(c) where the purchasers are the trustees of a settlement, and the seller is the settlor, or the wife or husband of the settlor, and it appears that the main purpose of the purchase is to obtain relief in respect of interest on the loan, or

(d) where the purchaser is directly or indirectly purchasing from a person who is connected with him, and the price substantially exceeds the value of what is acquired;

and subsection (1)(b) of that section shall not apply where the person spending the money is connected with the person who directly or indirectly receives the money, and the money substantially exceeds the value of the work done.

For the purposes of this subsection—

(i)

references to a husband and wife are references to a husband and his wife living with him; and

(ii)

one person is connected with another if he is so connected within the terms of section 839.

Textual Amendments

F1 Words which cease to have effect in relation to payments of interest made on or after 6April 1988—see 1988(F) s.44(1)(2).

F2 1988(F) s.42(3)(a).

F3 1988(F) s.43in relation to payments on or after 6April 1988.

F4 Repealed by 1988(F) ss.44and 148and Sch.14 Part IV.

Modifications etc. (not altering text)

C1 See reference to home improvement loans in 1988(F) s.43(3).

Marginal Citations

M1 Source-1974 Sch.1 4(1)-(3)

M2 Source-1974 Sch.1 7; 1977 Sch.8 9

M3 Source-1972 Sch.9 8