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,]. . .

(b) F2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F3 (1A) Where, in the case of any loan—

(a) the condition specified in [F4 subsection (1) above] would not (apart from this subsection) be fulfilled with respect to any land, caravan or house-boat by reason of its having ceased at any time to be used by a particular person as his only or main residence; and

(b) the borrower’s intention at that time was to take steps, before the end of the period of 12 months after the day on which it ceased to be so used, with a view to the disposal of that land, caravan or house-boat,

that condition shall be treated in relation to interest on that loan as continuing to be fulfilled with respect to that land, caravan or house-boat (as well as with respect to any other land, caravan or house-boat with respect to which it is in fact fulfilled) from that time until the end of that period or (if sooner) the abandonment by the borrower of his intention to dispose of the land, caravan or house-boat in question.

(1B) Where—

(a) subsection (1A) above has effect in the case of any loan (“the first loan”) so that the condition specified in [F4 subsection (1) above] is treated in relation to any person as fulfilled with respect to any land, caravan or house-boat, and

(b) there is another loan raised by the borrower to defray money to be applied as mentioned in section 354(1) with a view to the use of any other land, caravan or house-boat as the borrower’s only or main residence,

interest on the other loan shall be treated as eligible for relief to the same extent (if any) as if no interest were payable on the first loan.]

(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) [F5 or (1A)] 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.

[F6 (2A) Section 354 shall not apply by virtue of [F4 subsection (1) 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 considerationF7 .

(4) F8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(5) M2 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 S. 355(1)(b), the preceding word and the words following it repealed (with effect in accordance with s. 42(3)-(5) of the repealing Act) by virtue of Finance Act 1995 (c. 4), s. 42(1), Sch. 29 Pt. 8(2), Note

F3 s. 355(1A)(1B) inserted (27.7.1993 with effect in relation to payments of interest made on or after 16 March 1993 (whenever falling due)) by 1993 c. 34, s. 57(1)(5)(6)

F4 Words in s. 355 substituted (with effect in accordance with s. 42(3)-(5) of the amending Act) by Finance Act 1995 (c. 4), s. 42(2)(b)

F5 Words in s. 355(2) inserted (27.7.1993 with effect in relation to payments of interest made on or after 16 March 1993 (whenever falling due)) by 1993 c. 34, s. 57(2)(5)

F6 1988(F) s.43in relation to payments on or after 6April 1988.

F7 Repealed by 1988(F) ss.44and 148and Sch.14 Part IV.

F8 S. 355(4) repealed (with effect in accordance with s. 42(3)-(5)of the repealing Act) by Finance Act 1995 (c. 4), Sch. 29 Pt. 8(2), Note

Modifications etc. (not altering text)

C1 S. 355(1A) modified (27.7.1993 with effect in relation to payments of interest made on or after 16 March 1993 (whenever falling due)) by 1993 c. 34, s. 57(5)(6)

C2 See reference to home improvement loans in 1988(F) s.43(3).

Marginal Citations

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

M2 Source-1972 Sch.9 8