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HMRC internal manual

Employment Income Manual

The benefits code: beneficial loans: meaning of loan

Section 173(2)(a) ITEPA 2003

Loan means more than just lending money. It includes any form of credit. It follows that any kind of advance by reason of the employment is covered. For example, any amount shown in the employer’s books or records as owed by an employee will count as a loan.

Grant v Watton

The case of Grant v Watton (71TC333) concerned credit extended by a company of which Grant was a director, to his sole trade and later to a partnership in which Grant was the general partner. In the High Court Pumfrey J. considered the meaning of credit –

“….credit is granted where payment is not demanded until a time later than the supply of goods to which the payment relates. Credit is the deferral of payment of a sum which, absent agreement, would be immediately payable.”

Regarding the application of Section 175 ITEPA 2003 to an overdrawn director’s loan account see EIM26505.

Alternative finance arrangements

See EIM26515.