Cheap loans in the context of employment

That a cheap loan from employer to employee (be it a season ticket loan overdrawn director’s loan account or otherwise) may be classed as an employment benefit is a simple enough concept. However the legislation within ITEPA 2003 Part 3 Chapter 7 which addresses the subject of ‘employment related loans’ requires us to expand our thinking and it is not always straightforward in its practical application. This article looks at some of those practical issues. (All statutory references are to ITEPA 2003 unless otherwise stated.)

A quick recap

Firstly however to recap the basis of the annual charge is as follows:

• Subject to certain exceptions an employment related loan is a ‘taxable cheap loan’ in a tax year during the whole or part of which a...