SCHEDULES

SCHEDULE 4Cash basis for small businesses

PART 2Consequential amendments

ITA 2007

55

1

Chapter 1 of Part 8 of ITA 2007 (relief for interest payments) is amended as follows.

2

In section 383(5), after paragraph (a) insert—

aa

section 384B (restriction on relief where cash basis applies),

3

After section 384A insert—

384BRestriction on relief where cash basis applies

1

Relief is not to be given under this Chapter for a tax year for interest paid by a person on a relevant loan if the partnership to which the loan relates has made an election under section 25A of ITTOIA 2005 (cash basis for small businesses) for the tax year.

2

A loan is a “relevant loan” if—

a

it is a loan to which section 388 applies (loan to buy plant or machinery for partnership use), or

b

it is a loan to which section 398 applies (loan to invest in partnership) and which is not used for purchasing a share in a partnership.