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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 after an assessment is final

Section 191 ITEPA 2003

Problems can arise when interest that a taxpayer has to pay for a particular year is paid after the assessment on the benefit for that year has become final and conclusive. In such a case Section 191 allows the employee to make a claim for the assessment to be recalculated to take the belated interest payment into account, if any of the following circumstances arise:

  • if the interest payable on the loan and included as a benefit under Section 175(1) ITEPA 2003 is subsequently paid, or
  • if a benefit has been charged for a loan released or written off (see EIM26116) and the loan is subsequently repaid, or
  • a benefit on a bridging loan has been assessed to tax on the basis that the exemptions in Section 288 and 289 ITEPA 2003 do not apply because the condition in Section 288(1)(b) was not met, but it turns out that condition was met.

The onus is on the employee to claim this relief. He or she can do so at any time up to the end of the general time limits that are applicable to individuals making claims for repayment of income tax. These time limits are being reduced to four years from 1 April 2010 for Self Assessment taxpayers and from 1 April 2012 for individuals outside the Self Assessment regime.

Any tax overpaid as a result of the claim can be repaid or set off against any other tax liabilities in the usual way.

But see EIM26257 where there was no obligation existing during the year to pay interest for the year.