Commentary on Sections Overview Overview Section 388: Loan to buy plant or machinery for partnership use
1077.This section is the first of two dealing with a loan used by a partner in providing plant or machinery for partnership use. It is based on section 359(1) of ICTA.
1078.The reference to a vocation being carried on by a partnership contained in the source legislation has not been included in this section, or elsewhere, because a partnership cannot carry on a vocation.
1079.Subsection (2) makes it clear that the plant or machinery must be in use and that the partnership must be entitled to a capital allowance or balancing charge in respect of it for the period of account in which the interest is paid. The “in use” requirement is not explicitly specified in section 359(1) of ICTA, but is clear from section 359(2) and the wording of section 264 of CAA. The requirement in section 359(1) of ICTA that the plant or machinery must belong to the individual partner is not included as it is contained in section 264 of CAA.
1080.It is also made clear that ordinary property businesses (if carried on in partnership) are within the types of partnership business that qualify. See Change 68 in Annex 1.
1081.Subsection (3) ensures that relief remains available where the plant remains within the capital allowances regime, even if no allowance or balancing charge arise in the period of account. See Change 69 in Annex 1.
1082.Subsection (4) makes it explicit that the appropriate definitions of “capital expenditure” and “period of account” are those in sections 4 and 6 of CAA, which apply generally for capital allowances purposes, rather than the definitions in section 989 of this Act.