Deductible Payments

Question 1

What are deductible payments?

Answer 1

Deductible payments are deducted in arriving at net income, primarily from non-savings income.

Question 2

What is the cap on the total amount of certain reliefs including qualifying loan interest?

Answer 2

The greater of £50,000 or 25% of adjusted total income

Question 3

What is the most important type of deductible payment?

Answer 3

Interest on qualifying loans.

Question 4

What types of loans qualify for deductible interest?

Answer 4

Qualifying interest includes interest on the following types of loan:
* Loan taken out by an employee to buy plant and machinery
* Loan to buy shares in a close company/provide funds to a close company
* Loan to buy shares in an employee-owned company
* Loan to buy into a partnership

Note that the loan for buying a car is not included.

Question 5

True or False: Interest on qualifying loans is deducted after tax computation.

Answer 5

False.

Interest on qualifying loans is deducted in the tax computation.

Question 6

Fill in the blank: The cap on deductible payments is the greater of £50,000 or _______.

Answer 6

25% of adjusted total income.

Question 7

What section of the Income Tax Act addresses qualifying interest?

Answer 7

ITA 2007, ss.388-403.

This section outlines the specifics of deductible payments for tax purposes.