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HMRC internal manual

Employment Income Manual

Para 11: loan charge relevant step: meaning of outstanding quasi-loan

Schedule 11 F(No 2)A 2017

The amount of the relevant step taken on 5 April 2019 will depend on the outstanding balance of the quasi-loan on that date. It is therefore necessary to define the initial debt amount and any repayments against that amount.

Para 11(1) states that an amount of a quasi-loan is outstanding if the initial debt amount exceeds the repayment amount.

The initial debt amount is defined in Para 11(2) as an amount equal to the value of the acquired debt as well as the value of any additional debts for which P has acquired a right to either payment or to the transfer of an asset. It excludes any additional debt which has accrued to P under capitalisation of interest. This restricts the value of the quasi-loan to the initial debt amount plus any additional debts which have been added.

Where the acquired debt is the right to the transfer of an asset, the value of the debt is the higher of the market value of the asset at the time P acquires the right to its transfer or the cost of the asset at that time.

It is then necessary to consider what repayments can be set against the initial debt amount. Para 11(4) defines repayment amounts as the amount repaid against the initial debt before 17 March 2016 as well as any payments against the principal in money made by the relevant person on or after that date.

Where the initial debt amount includes the right to a transfer of an asset and that asset has been transferred, the repayment amount includes an amount equal to the market value of the asset at the time it was transferred.

Certain payments are disregarded when considering the amount repaid against the initial debt amount under Para 12. Details of these are given in EIM47075.