Part 3

Employment income: earnings and benefits etc. treated as earnings
Chapter 7

Taxable benefits: loans

Calculation of amount of interest at official rate

Alternative method of calculation
183
1
The alternative method of calculating for the purposes of this Chapter the amount of interest that would be payable on a loan for a tax year at the official rate applies for a tax year—
a
if an officer of Revenue and Customs so requires , by notice to the employee, or
b
if the employee so elects, by notice to an officer of Revenue and Customs .
2
Notice may be given on or before the first anniversary of the normal self-assessment filing date for the tax year in relation to which the question arises whether the loan is a taxable cheap loan.
3
The alternative method is as follows—
Step 1
Find for each day in the tax year in question the maximum amount of the loan outstanding on that day and multiply it by the official rate of interest in force on that day.
Step 2
Add together each of the amounts obtained under step 1.
Step 3
Divide the result by the number of days in the tax year.
4
Where in any tax year the cash equivalent of the benefit of the same taxable cheap loan is to be treated as earnings of two or more employees then, for the purposes of determining the cash equivalent of the benefit of the loan, the alternative method applies if—
a
the notice under subsection (1)(a) is given to all those employees, or
b
the notice under subsection (1)(b) is given by all those employees.
Words in Act substituted (18.4.2005) by Commissioners for Revenue and Customs Act 2005 (c. 11), s. 53(1), Sch. 4 para. 102(1); S.I. 2005/1126, art. 2(2)(h)
Pt. 3 Ch. 7 extended (with modifications) (with effect in accordance with s. 97(3) of the amending Act) by Finance Act 2006 (c. 25), s. 97(1)(2)
Word in s. 183(1)(a) substituted (18.4.2005) by Commissioners for Revenue and Customs Act 2005 (c. 11), s. 53(1), Sch. 4 para. 110; S.I. 2005/1126, art. 2(2)(h)