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HMRC internal manual

Employment Income Manual

The benefits code: beneficial loans: interaction between employment income and other tax charges: treatment of misappropriations in company investigation cases

Although the phrase making a loan has a very wide meaning (see EIM26110) it is not wide enough to include sums taken from a company without proper authorisation. Misappropriations that are discovered during the investigation of a company’s accounts will therefore not necessarily give rise to liability under Section 175 ITEPA 2003 for the investigation period. The conditions that have to be satisfied if a Section 175 charge is to be taken are set out in The Enquiry manual at EM8510.

When the investigation has been completed, Section 175 liability will apply:

  • in extractive settlements from the date the company is aware of the misappropriation, or
  • in non-extractive settlements from the date the loan was made,

until such time as the debt has been repaid (see EM8510).

It this treatment is not accepted you should consult Central Policy Tax Administration Advice.