Income and Corporation Taxes Act 1988

Notional interest treated as paid if amount charged in respect of beneficial loan U.K.

13 (1) This paragraph applies where a person is chargeable to tax under section 148 in any tax year on an amount which consists of or includes an amount representing the cash equivalent of the benefit of a loan determined in accordance with Part II of Schedule 7.

(2) Where this paragraph applies, the person chargeable is treated as having paid interest on the loan of the same amount as the cash equivalent so determined.

This is subject to application of the £30,000 threshold: see sub-paragraph (5) below.

(3) The interest is treated as paid for all the purposes of the Tax Acts (other than section 148 and this Schedule), but not so as to make it—

(a) income of the person making the loan, or

(b) relevant loan interest to which section 369 applies (mortgage interest payable under deduction of tax).

(4) The interest is treated as accruing during and paid at the end of the tax year or, if different, the period in the tax year during which the loan is outstanding.

(5) No amount of interest is treated as paid under this paragraph in a tax year in which, after applying the £30,000 threshold in section 148(1), no amount falls to be charged to tax.

If in any tax year the effect of the £30,000 threshold is that some but not all of the amount otherwise chargeable is charged to tax, the amount of interest treated as paid is limited to the amount charged to tax.