Introduction Paragraph 1:
59.The interest relief rules encourage investment in certain small businesses carried on commercially and with a view to profit. The return on a normal investment in such a business would not be a guaranteed one such that after deducting obligations under the loan from sums to which the investment gives rise the investor was certain to be able to exit with a profit. But in schemes notified to HM Revenue & Customs (HMRC), arrangements are in place that mean that after the availability of the interest relief for the interest is taken into account the investor cannot fail to make a profit.
60.The new measure will deny relief for interest if the loan is paid as part of an arrangement that is certain (ignoring insignificant risk) to allow the investor to exit the arrangement with more money than was originally invested. It will not affect genuine commercial investments in business where there is uncertainty as to the return that will be produced from the arrangements.