Income Tax (Earnings and Pensions) Act 2003

175 Benefit of taxable cheap loan treated as earnings

(1) The cash equivalent of the benefit of an employment-related loan is to be treated as earnings from the employee’s employment for a tax year if the loan is a taxable cheap loan in relation to that year.

(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—

• section 180 (threshold for benefit of loan to be treated as earnings);

• section 186 (replacement loans).