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HMRC internal manual

Employment Income Manual

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HM Revenue & Customs
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The benefits code: beneficial loans: exemptions from charge: contrasting treatment where some or part of the interest would qualify for relief

Section 178 ITEPA 2003

If the interest that is payable (or would be payable if the loan bore interest) on a qualifying loan (see EIM26136) is wholly eligible for relief under Section 353 ICTA 1988 (see RE330), or in computing profits of a trade, profession or vocation as Trading Income or as Property Income, then the loan is exempt from the charge on beneficial loans under Section 175(1) ITEPA 2003 (see EIM26102).

If only part of the interest qualifies for relief or deduction, the loan is not exempt. The cash equivalent of the loan (see EIM26200) is calculated without reference to any relief or deduction due. The employee claims any partial relief due under Section 353, or makes the appropriate deduction against Trading or Property Income, as a separate matter. See example 2 at EIM26130.

See EIM26136 and EIM26137 for more about the distinction between loans on which the whole and on which part of any interest would qualify for relief.