Loans written off

Produced by a Tolley Employment Tax expert

Employment Tax

Guidance

Companies sometimes provide directors, employees or shareholders with low interest or interest-free loans either as part of the reward package or on special occasions to help the individual meet significant expenditure. The employment income implications of these loans are discussed in detail in the Loans provided to employees guidance note.

Normally the loan is repaid, however occasionally the company may decide to write off (release) the loan, meaning the individual does not have to pay back the balance.

If the loan is made to an employee (including a director), the amount of the loan released is treated as employment income. However, if the loan is made to an employee who is also a shareholder and the company is a close company which has been taxed in respect of the loan, the release of the loan is treated as dividend income and taxed accordingly (see below).

HMRC guidance is from EIM26116. See also Simon’s Taxes E4.647.

If the loan is provided by a third party, rather than the employer, it is worth considering whether the disguised remuneration

Access this article and thousands of others like it
free for 7 days with a trial of Tolley+™ Guidance.

TAKE A FREE TRIAL

Popular Articles

Owner-Managed Businesses

Interest on late paid tax

Interest on late paid taxIntroductionInterest on late paid tax is a compulsory charge set out in legislation to reflect the interest which would have accrued to the Exchequer had the correct amount of tax been paid at the right time.Harmonised legislation was introduced in 2009 to:•set statutory

14 Jul 2020 12:00 | Produced by Tolley in association with Philip Rutherford Read more

Trusts and Inheritance Tax

Bare trusts ― income tax and CGT

Bare trusts ― income tax and CGTThis guidance note explains how trustees of bare trusts are treated for income tax and capital gains purposes. Although a bare trust is, in equity, a type of trust, for both income tax and capital gains tax purposes its existence is transparent. This means that no tax

14 Jul 2020 15:34 | Produced by Tolley Read more

Value Added Tax

VAT registration ― artificial separation of business activities (disaggregation)

VAT registration ― artificial separation of business activities (disaggregation)This guidance note should be read in conjunction with the VAT registration ― compulsory guidance note and is relevant to persons established or resident in the UK. Persons that are not established or resident in the UK

14 Jul 2020 13:57 | Produced by Tolley Read more

��˾��ҹ��