- Commercial terms. Loans made on commercial terms by an employer whose
business includes the making of loans, where a substantial proportion
of those loans are made to members of the public at large, and at arm’s
length, are excluded from liability to tax. The terms on which the loans
are made to the employee must be comparable to the loans to the public.150
- Fixed-term loans originally at the official rate. The charge is aimed
at loans below the official (market) rate of interest. If the loan is
a fixed-interest loan and was not below that rate when it was made the
subsequent increase in the official market rate in a later year does
not cause the loan to become chargeable.151
- Death. An employee’s loan ceases to be outstanding on his death,152
as such, no cash equivalents can arise for later periods.
- Other termination of employment. Although the legislation does not
in terms address the issue of the ending of employment section 175 (ex
160(1)) applies only for those periods during which while the person
is in employment.153
- Qualifying loans. Qualifying loans are loans in respect of which the
borrower can claim deduction for the interest as a trading expense or
as being for eligible for relief under section 353.154
Qualifying loans are not taken into account in calculating the de minimis
limit of £5,000.155
- Bridging loans. Section 173(3) carefully makes a cross reference to
the exemption in sections 288 and 289 for certain bridging loans connected
with employment moves; those exemptions mean that section 175 is excluded
also. No liability can arise under section 188 because loan must be
discharged before end of period.
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