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HMRC internal manual

Employment Income Manual

Particular benefits: loans written off after termination or ceasing to be within a UK charge to tax in respect of the loan

Section 188(2) ITEPA 2003

The release or writing off of a loan made to a director or employee (or any relative of theirs) by reason of the employment is still chargeable if it takes place:

  • after he or she has retired, or
  • after he or she has ceased to be a director or in employment falling within the benefits code (see EIM20007).

Instances of an employment ceasing to be within the benefits code include, for 2015/16 and earlier only, earnings falling below the £8,500 threshold (see EIM20101) and the employee leaving the UK and ceasing to be within UK jurisdiction for the purposes of tax on employment income (see EIM40001 onwards).

Section 188(2) ITEPA 2003 deems the directorship or employment not to have terminated, and/or to have remained within the benefits code.

This rule prevents people avoiding a charge by deferring the release or writing off until after the events mentioned above have occurred.

See EIM21744 for the interaction with the termination payment provisions of Part 6 Chapter 3 ITEPA 2003.