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HMRC internal manual

Employment Income Manual

HM Revenue & Customs
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The benefits code: beneficial loans: general

Part 3 Chapter 7 ITEPA 2003

An employee can obtain a benefit when provided with an employment-related cheap or interest-free loan. The benefit is the difference between the interest the employee pays, if any, and the commercial rate the employee would have to pay on a loan obtained elsewhere. Such loans are called beneficial loans.

An employee can also benefit if an employment-related loan is released or written off. He or she is then no longer obliged to repay the amount that was lent.

There are special rules relating to the taxation of these benefits.

The relevant guidance is:

  • beneficial loans, see EIM26102 onwards
  • loans released or written off, see EIM01490 and EIM21740 onwards.

If a beneficial loan is made to enable an employee to acquire shares in a company you will need to consult the guidance in the Share Scheme Manual.