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HMRC internal manual

Employment Income Manual

Removal or transfer costs: expenses and benefits to which Section 271 ITEPA 2003 applies: compensation payments for loss on sale

Part 4 Chapter 7 ITEPA 2003

If an employer makes a payment to an employee to compensate for the fact that the employee’s house has fallen in value, or to make up a shortfall where the house is sold for less than the bridging loan outstanding on it, there is no exemption.The payment is taxable in full. However see EIM00750 for the exceptional circumstances in Hochstrasser v Mayes (38TC673).

If an employer lends an employee money to cover a shortfall, there is a tax charge under Part 3 Chapter 7 ITEPA 2003.

If an employer provides a bridging loan and waives part of it because the selling price of an employee’s property is less than the amount outstanding the waiver is charged to tax under Section 188(1) ITEPA 2003 (see EIM21741 onwards).