HMRC internal manual

Employment Income Manual

EIM26102 - The benefits code: beneficial loans: when a chargeable benefit arises from a taxable cheap loan

Section 175(1) and (2) ITEPA 2003

Subject to the exceptions summarised at EIM26132 a chargeable benefit arises when an employment-related loan (EIM26113) which is a taxable cheap loan is provided to an employee, except for 2015/16 and earlier one in an excluded employment (see EIM20007).

A taxable cheap loan is an employment-related loan

  • which is outstanding for all or part of the year in which the employee is in employment, and
  • no interest is paid on the loan, or the interest paid is less than is due at the official rate (EIM26104) of interest, and
  • none of the exceptions in sections 176-179 ITEPA applies (EIM26132).

It is not necessary for the loan to be advantageous to the recipient for a chargeable benefit to arise. It is sufficient if the cheap or interest-free loan is made by reason of his or her employment (see Williams v Todd (60TC727)).