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HMRC internal manual

Employment Income Manual

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HM Revenue & Customs
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Removal or transfer costs: expenses and benefits to which Section 271 ITEPA 2003 applies: bridging loans: loans provided by the employer: example

Section 284 ITEPA 2003

An employee starts a new job on 1 February 2004. His employer makes him an interest-free bridging loan of £100,000 on 1 May 2004. The loan is repaid on 1 March 2005. His other qualifying removal expenses and benefits are £7,500. The time limit (see EIM03104) expires on 5 April 2005. The official rate on 1 May 2004 is 5 per cent.

So in the formula in step 3 at EIM03124

A = £500 (£8,000 - £7,500)

B = £100,000

C = 5%

(£500 x 365) / (£100,000 x 5%) = 36.5    
     
     

The result is rounded up to 37 and the loan is treated as having been made on 8 June 2004. The charge under Part 3 Chapter 7 ITEPA 2003 is then calculated taking into account all the normal rules (see EIM26101 onwards).

If the loan is repaid before the end of the number of days calculated by using the formula there is no charge to tax under Part 3 Chapter 7.