Part 3Employment income: earnings and benefits etc. treated as earnings
Chapter 7Taxable benefits: loans
Introduction
173Loans to which this Chapter applies
(1)
This Chapter applies to a loan if it is an employment-related loan.
F1(1A)
Where this Chapter applies to a loan—
(a)
the loan is a benefit for the purposes of this Chapter (and accordingly it is immaterial whether the terms of the loan constitute a fair bargain), and
(b)
sections 175 to 183 F2make provision about amounts which, in the case of a taxable cheap loan, are to be treated as earnings in certain circumstances .
(2)
In this Chapter—
(a)
“loan” includes any form of credit, and
(b)
references to making a loan (and related expressions) include arranging, guaranteeing or in any way facilitating a loan.
(3)
Sections 288 and 289 make provision for exemption and relief for certain bridging loans connected with employment moves.
F3173AAlternative finance arrangements
(1)
For the purposes of this Chapter a reference to a loan includes a reference to arrangements—
(a)
to which section 564C of ITA 2007 or section 503 of CTA 2009 (purchase and resale arrangements) applies (or would apply assuming one of the parties were a financial institution), or
(b)
to which section 564D of ITA 2007 or section 504 of CTA 2009 (diminishing shared ownership arrangements) applies (or would apply on that assumption).
(2)
In the application of this Chapter as a result of this section, a reference to interest is to be treated as including alternative finance return (or anything that would be such return on that assumption).
(3)
In the application of this Chapter as a result of this section, a reference to the amount outstanding is to be taken—
(a)
in the case of arrangements within subsection (1)(a), as a reference to the purchase price minus such part of the aggregate payments made as does not represent alternative finance return (or anything that would be such return on that assumption),
(b)
in the case of arrangements to which section 564D of ITA 2007 or section 504 of CTA 2009 applies, as a reference to the amount of the financial institution's original beneficial interest minus such part of the aggregate payments made as does not represent alternative finance return, and
(c)
in the case of arrangements to which section 564D of ITA 2007 or section 504 of CTA 2009 would apply assuming one of the parties were a financial institution, as a reference to the amount of that party's original beneficial interest minus such part of the aggregate payments made as does not represent anything that would be alternative finance return on that assumption.
(4)
In this section—
“alternative finance return” has the meaning given in sections 564I to 564L of ITA 2007 or sections 511 to 513 of CTA 2009, and
“financial institution” has the meaning given in section 564B of ITA 2007 or section 502 of CTA 2009.
(5)
This section does not apply to arrangements entered into before 22 March 2006.
174Employment-related loans
(1)
For the purposes of this Chapter an employment-related loan is a loan—
(a)
made to an employee or a relative of an employee, and
(b)
of a class described in subsection (2).
(2)
For the purposes of this Chapter the classes of employment-related loan are—
A
A loan made by the employee’s employer.
B
A loan made by a company or partnership over which the employee’s employer had control.
C
A loan made by a company or partnership by which the employer (being a company or partnership) was controlled.
D
A loan made by a company or partnership which was controlled by a person by whom the employer (being a company or partnership) was controlled.
E
A loan made by a person having a material interest in—
(a)
a close company which was the employer, had control over the employer or was controlled by the employer, or
(b)
a company or partnership controlling that close company.
(3)
In this section—
“employee” includes a prospective employee, and
“employer” includes a prospective employer.
(4)
References in this section to a loan being made by a person extend to a person who—
(a)
assumes the rights and liabilities of the person who originally made the loan, or
(b)
arranges, guarantees or in any way facilitates the continuation of a loan already in existence.
(5)
A loan is not an employment-related loan if—
(a)
it is made by an individual in the normal course of the individual’s domestic, family or personal relationships, or
(b)
it is made to a relative of the employee and the employee derives no benefit from it.
(6)
For the purposes of this section a person (“X”) is a relative of another (“Y”) if X is—
(a)
Y’s spouse F4or civil partner ,
(b)
a parent, child or remoter relation in the direct line either of Y or of Y’s spouse F4or civil partner ,
(c)
a brother or sister of Y or of Y’s spouse F4or civil partner , or
(d)
the spouse F4or civil partner of a person falling within paragraph (b) or (c).