Income Tax (Earnings and Pensions) Act 2003 (c. 1)

Part 6 U.K. Employment income: income which is not earnings or share-related

Chapter 3 U.K. Payments and benefits on termination of employment etc.

General and supplementary provisions U.K.

416 Notional interest treated as paid if amount charged for beneficial loan U.K.

(1) This section applies if an amount (“the taxable amount”) consisting of, or including, an amount representing the benefit of a loan counts as a person’s employment income in a tax year under section 403.

(2) That person is to be treated for the purposes of the Tax Acts (other than this Chapter) as having paid interest on the loan in the tax year equal to the lesser of—

(a) the amount representing the cash equivalent of the loan, and

(b) the taxable amount.

(3) The interest is to be treated—

(a) as accruing during the period in the tax year during which the loan is outstanding, and

(b) as paid at the end of the period.

(4) 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).