CH19 - Loans to Employees

Question 1

Loans

If a cheap loan is made to an employee by their employer, it only leads to a taxable benefit if ?

Answer 1

the aggregate of all loans outstanding throughout the tax year exceeds £10,000.

Question 2

Loans

There are two methods to calculate the benefit. The average method is as follows: ?

Answer 2

(Loan at 6 April + Loan at 5 April)/2 x Average ORI for tax year

Apportioned based on the number of complete tax months loan outstanding.

If there is no loan at the start of the tax year, start with the amount of the loan at the point it was made. If the loan outstanding at the end of the tax year is nil, add on the amount of the loan at the point it was repaid.

Question 3

Loans

The strict method ?

Answer 3

calculates interest on a monthly basis using the exact loan outstanding during the year.

Question 4

Loans

The taxpayer can elect for the strict basis if ?

Answer 4

it is lower; HMRC will insist on the strict basis if the benefit would otherwise be significantly distorted.

Question 5

Loans

If a loan (whether it is cheap or not) is released or written off by the employer, the amount released or written off is treated as ?

Answer 5

earnings.