Finance Act 2017

Loans: transferring, releasing or writing off U.K.

3 (1) Section 554C (relevant steps: payment of sum, transfer of asset etc.) is amended as follows. U.K.

(2) In subsection (1), after paragraph (a) insert—

“(aa) acquires a right to a payment of a sum of money, or to a transfer of assets, where there is a connection (direct or indirect) between the acquisition of the right and—

(i) a payment made, by way of a loan or otherwise, to a relevant person, or

(ii) a transfer of assets to a relevant person,

(ab) releases or writes off the whole or a part of—

(i) a loan made to a relevant person, or

(ii) an acquired right of the kind mentioned in paragraph (aa),”.”

(3) After subsection (3) insert—

“(3A) For the purposes of subsection (1) “loan” includes—

(a) any form of credit, and

(b) a payment that is purported to be made by way of a loan.

(3B) Subsection (3C) applies where a person (“T”) acquires from another person (“L”) (whether or not for consideration)—

(a) a right to payment of the whole or part of a loan where T is the person liable (at the time of the acquisition of the right) to repay the loan, or

(b) a right to payment of a sum of money, or to a transfer of assets, where T is the person liable (at the time of the acquisition of the right) to pay the sum, or transfer the assets.

(3C) L is to be treated for the purposes of subsection (1)(ab) as releasing—

(a) in a case within subsection (3B)(a), the loan or the relevant part of it;

(b) in a case within subsection (3B)(b), the right or the relevant part of it.”

4 U.K. In section 554A(4) (non-application of Chapter 2 where relevant step taken on or after A's death)—

(a) omit “within section 554B”, and

(b) at the end insert “if—

(a) the relevant step is within section 554B, or

(b) the relevant step is within section 554C by virtue of subsection (1)(ab) of that section.”

5 U.K. After section 554O insert—

“554OA Exclusions: transfer of employment-related loans

(1) Chapter 2 does not apply by reason of a relevant step taken by a person (“P”) if—

(a) the step is acquiring a right to payment of an amount equal to the whole or part of a payment made by way of a loan to a relevant person (the “borrower”),

(b) the loan, at the time it was made, was an employment-related loan,

(c) at the time the relevant step is taken, the section 180 threshold is not exceeded in relation to the loan,

(d) at the time the relevant step is taken, the borrower is an employee, or a prospective employee, of P, and

(e) there is no connection (direct or indirect) between the relevant step and a tax avoidance arrangement.

(2) For the purposes of this section, the section 180 threshold is not exceeded in relation to a loan if, at all times in the relevant tax year—

(a) the amount outstanding on the loan, or

(b) if two or more employment-related loans are made by the same employer, the aggregate of the amount outstanding on them,

does not exceed the amount specified at the end of section 180(2) (normal threshold for benefit of a loan to be treated as earnings).

(3) Subsection (4) applies if—

(a) two or more employment-related loans are made by the same employer, and

(b) during the relevant tax year, a person acquires a right to payment of an amount (the “transfer amount”) equal to the whole or part of the payment made by way of any of the loans.

(4) The transfer amount is to be treated as an “amount outstanding” on that loan for the purposes of subsection (2)(b).

(5) In this section—

(a) “employment-related loan” has the same meaning as it has for the purposes of Chapter 7 of Part 3;

(b) “relevant tax year” means the tax year in which the relevant step is taken.”

6 U.K. In section 554Z(10)(b) (interpretation: relevant step which involves a sum of money), after “section 554C(1)(a)” insert “ to (ab) ”.

7 U.K. In section 554Z12(1) (relevant step taken after A's death etc.), after “554C” insert “ , by virtue of subsection (1)(a) or (b) to (e) of that section, ”.