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HMRC internal manual

Employment Income Manual

The benefits code: beneficial loans: exemption for commercial loans

Section 176(1), (2) and (3) ITEPA 2003There is no chargeable benefit on a loan made on ordinary commercial terms to an employee if:

  • the loan was made by a person in the ordinary course of a business carried on by that person that includes the lending of money and
  • at the time when the employee loan was made the lender was making comparable loans (see EIM26159) available to all potential borrowers and
  • of the comparable loans made by the lender at or about the time (see EIM26162) the employee loan was made, a substantial proportion (see EIM26160) was made to members of the public at large with whom the lender was trading at arms length (see EIM26164) and
  • the same terms apply to all the comparable loans (including the employee loan) and
  • where the terms of the comparable loans (including the employee loan) are different from the original terms, the new terms were imposed in the ordinary course of the lender’s business.Note that the exemption is due only if

all these conditions are satisfied.

The exemption also applies in a similar way to credit advanced by an employer in the ordinary course of a business that includes the supplying of goods or services on credit.

See EIM26170 for the exemption that applies for loans varied onto commercial terms.