My client has borrowed money to lend to a close limited company in which he has an interest of at least 5%. The company owns property which it rents out to unconnected parties.
Is the company classed as an investment company and therefore his claim to an interest deduction fails? ITA 2007 ss383/392. I have a feeling that a “property investment company” is not an “investment company” but I'm not sure.
Assume all other conditions are met.
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Close investment holding company
A property investment company where, as in your case, the property is not lent to connected parties, is not a close investment holding company so this will not prevent relief being available.
s392
permits relief other than in the case of a close investment holding company. That is defined at CTM60710 to exclude from being a CIHC property investment companies where the property is let to unconnected parties. So you should be OK with this.