(1)This section applies where the cash equivalent of the benefit of a taxable cheap loan is treated as earnings from an employee’s employment for a tax year under section 175(1).
(2)The employee is to be treated for the purposes of the Tax Acts as having paid interest on the loan in that year equal to the cash equivalent.
(3)But the employee is not to be treated as having paid that interest for the purposes of this Chapter or of any of the other Chapters of this Part listed in section 216(4) (provisions of the benefits code which do not apply to lower-paid employment).
(4)The interest is to be treated—
(a)as accruing during the period in the tax year during which the employee holds the employment and the loan is outstanding, and
(b)as paid by the employee at the end of the period.
(5)The interest is not to be treated—
(a)as income of the person making the loan, or
(b)as relevant loan interest to which section 369 of ICTA applies (mortgage interest payable under deduction of tax).