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Legislation
Income Tax (Earnings and Pensions) Act 2003

Crossheading Benefit of taxable cheap loan treated as earnings

  • Section 175 Benefit of taxable cheap loan treated as earnings
  • Section 175A Optional remuneration arrangements: “relevant amount” and “modified cash equivalent”
  • Section 176 Exception for loans on ordinary commercial terms
  • Section 177 Exceptions for loans at fixed rate of interest
  • Section 178 Exception for loans where interest qualifies for tax relief
  • Section 179 Exception for certain advances for necessary expenses
  • Section 180 Threshold for benefit of loan to be treated as earnings
  1. Benefit of taxable cheap loan treated as earnings
  2. Benefit of taxable cheap loan treated as earnings

Section 175 | Benefit of taxable cheap loan treated as earnings

From legislation.gov.uk

(A1)This section applies where an employment-related loan is a taxable cheap loan in relation to a tax year.F1

(1)The cash equivalent of the benefit of the loan is to be treated as earnings from the employee's employment for the tax year.F1

(1A)If the benefit of the loan is provided pursuant to optional remuneration arrangements and the condition in subsection (1B) is met—F1

(a)subsection (1) does not apply, andF1

(b)the relevant amount (see section 175A) is to be treated as earnings from the employee's employment for the tax year.F1

(1B)The condition is that the amount foregone with respect to the benefit of the loan for the tax year (see section 69B) is greater than the modified cash equivalent of the benefit of the loan for the tax year (see section 175A).F1

(2)For the purposes of this Chapter an employment-related loan is a “taxable cheap loan” in relation to a particular tax year if—

(a)there is a period consisting of the whole or part of that year during which the loan is outstanding and the employee holds the employment,

(b)no interest is paid on it for that year, or the amount of interest paid on it for that year is less than the interest that would have been payable at the official rate, and

(c)none of the exceptions in sections 176 to 179 apply.

(3)The cash equivalent of the benefit of an employment-related loan for a tax year is the difference between—

(a)the amount of interest that would have been payable on the loan for that year at the official rate, and

(b)the amount of interest (if any) actually paid on the loan for that year.

(4)If there are two or more employment-related loans, this section applies to each separately.

(5)This section is subject to—

Notes

  1. F1

    S. 175(A1)-(1B) substituted for s. 175(1) (with effect in accordance with Sch. 2 para. 62 of the amending Act) by Finance Act 2017 (c. 10), Sch. 2 para. 43

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