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HMRC internal manual

Employment Income Manual

Para 14 to 16: loan charge relevant step: meaning of outstanding for quasi-loans in non-sterling currencies

Schedule 11 F(No 2)A 2017

Specific provisions apply where a quasi-loan has been made in a currency other than sterling. Where it is reasonable to suppose that one of the main reasons for making the loan in a particular currency was that it was expected to depreciate against sterling, please see EIM47090 et seq. The provisions for any other non-sterling currency loans are detailed below.

For all non-sterling quasi-loans however, the provisions of Paras 1 to 5 apply to determine whether an amount of a quasi-loan remains outstanding and therefore whether the loan charge applies. Paras 14 to 16 provide specific rules for currency conversion for quasi-loans in non-sterling currencies which are not expected to depreciate significantly.

If a quasi-loan is made in a currency other than sterling, the quasi-loan currency is taken to be the currency in which right to payment is acquired.

Where a conversion from an amount in the quasi-loan currency into an amount in sterling needs to be done, an appropriate spot rate of exchange can be used.

The amount of the quasi-loan which is outstanding at the time P is treated as taking the loan charge relevant step is to be calculated in sterling. Para 15(3) provides for a two-step calculation.

Step 1 – calculate in the quasi-loan currency the amount which is outstanding at that time.

Step 2 – take the value in sterling at that time of that amount.

Where repayments in money are made in a currency which is not the quasi-loan currency, the repayment amount is converted into an amount equal to its value in the quasi-loan currency on the date it is made.