EIM46105 - New relevant steps: loan transfer, release or write off

ITEPA 2003 – section 554C

The Finance Act 2017 amendments have created new relevant steps which occur in relation to loans already made which are subsequently transferred, released or written off.

For the purposes of the new legislation, the normal terminology of section 554C is applied. A person is P and will be the third party who takes the relevant step. A relevant person is defined in section 554C(2).

A relevant step is taken under section 554C(1)(aa) where a person (P) acquires a right to a payment of a sum of money or to the transfer of an asset. There has to be a connection (either direct or indirect) between the acquisition of the right and a payment or transfer of an asset to a relevant person. The payment can be by way of a loan or otherwise.

A relevant step will be taken under this new provision where a loan was made to an employee by a third party but new arrangements are put in place to transfer the loan to someone else. This may involve the receipt by the third party of an asset transferred from another party.

A relevant step will be taken under section 554C(1)(ab) where P releases or writes off the whole or part of a loan made to a relevant person. This also includes the write off or release of an acquired right as detailed above. If a relevant step is taken under this sub-section after the death of the employee, the value of the relevant step will not count as income under Part 7A.

A relevant step will be taken under section 554C(1)(ab) where the rights to the repayment of a loan are transferred to the person responsible for repaying the loan. Such a transaction makes the borrower the same person as the lender so would have the effect of writing off the loan. These provisions also apply to transfers of rights to either payments of sums of money or transfers of assets where the person who acquires the rights is the person who was liable to make the payment or transfer the asset.

Such transfers of rights are treated as releases under section 554C(1)(ab) under new provisions in section 554C(3B) and (3C).

In these provisions, loan means any form of credit or any payments which are purported to be made by way of loan.