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HMRC internal manual

Employment Income Manual

Exclusions: transfer of employment-related loan

ITEPA 2003 – section 554OA

During consultation for the FA 2017 amendments, concern was expressed that the transfer of loan provisions would result in a relevant step occurring when an employee changed jobs and also transferred an employment related loan from their old employer to their new employer.

Section 554OA prevents a charge under Part 7A in these circumstances. It applies if the relevant step arises because the new employer acquires a right to a payment of an amount for the whole or part of a loan made to the employee – section 554OA(1)(a).

It requires the loan to be employment-related at the time it was made – section 554OA(1)(b).

The loan must also not exceed the threshold for loans given in section 180(2) ITEPA 2003. Where an employer makes 2 or more loans, the aggregate of the outstanding balance of those loans is taken to decide whether or not the section 180 threshold has been exceeded. If it has, the exclusion will not apply.

The employee must also be an employee or prospective employee at the time the new employer acquires the right to repayment of the loan – section 554OA(1)(d).

The final condition is that there can be no connection between the relevant step and a tax avoidance arrangement.