I have a holiday let partnership client. One of the partners is resident in Germany for tax purposes. During the year the German resident partner leant the partnership approximately £170,000 to purchase a new holiday cottage. The partnership has been paying gross interest at 5%.
On preparation of the 2012 Personal Tax Return using IRIS, the interest paid has been removed as "Excluded Income" i.e. it is greater than the Personal Allowance.
Would this be correct to submit? Should the partnership be paying the interest gross?
I would be very grateful for any assistance!