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HMRC internal manual

Employment Income Manual

HM Revenue & Customs
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The benefits code: beneficial loans: calculating the cash equivalent: interest paid half yearly

Loan agreements often provide for interest to be paid half-yearly, for example, on 1June and 1 December each year. Because of this, it sometimes happens that the firstinterest payment does not fall due until after the end of the income tax year in which theloan is obtained. This does not mean that no interest is payable for that year. Interestis payable for that year and will be paid in the following year. The appropriateproportion of it should be taken when it has been paid.

See the example at EIM26253.

The difference between the interest paid in the year and the interestpaid for the year will not usually be important except where the loan istaken out or repaid part way through a year. In most cases you can treat the interest paidin the year as the amount to be taken into account under EIM26250 (seeexample at EIM26312). Interest paid for theyear need only be calculated where

  • the interest paid in the year is significantly less than the interest paid for the year (as in the example at EIM26253), or
  • the employee specifically asks for this.