Commentary on Sections Overview Overview Section 390: Loan to buy plant or machinery for employment use
1086.This section is the first of two dealing with a loan used by an individual to provide plant or machinery for use as an employee or office-holder. It is based on section 359(3) of ICTA.
1087.Subsection (2) makes it clear that the plant or machinery must be in use, that it must belong to the individual and that the individual must be entitled to a capital allowance or balancing charge in respect of it for the tax year in which the interest is paid. The “in use” requirement is explicitly specified in section 359(3) of ICTA. It is necessary to retain the “belonging to” test here as that is not a requirement of eligibility to capital allowances.
1088.Subsection (3) corresponds to section 388(3). See Change 69 in Annex 1 and the commentary on section 388.
1089.Section 37 of CAA (exclusion where sums payable in respect of depreciation) may operate to deny entitlement to capital allowances in respect of the expenditure met by the employee. In such a case subsection (4) preserves entitlement to relief for the interest if a contribution to the expenditure has been made by the individual’s employer.