Employment-related loans—defined

The following Tax practice note provides comprehensive and up to date legal information covering:

  • Employment-related loans—defined
  • Meaning of loan
  • Meaning of making a loan
  • Employment-related loans within the benefits code
  • Meaning of relative
  • Loans taken over from another person
  • Loans to directors or employees coming to the UK
  • Family exception from employment-related loan
  • Relative exception from employment-related loan

Employment-related loans—defined

Specific rules in the benefits code in ITEPA 2003, Part 3 apply to 'employment-related loans' and, in certain circumstances, impose income tax and National Insurance contributions (NICs) charges on directors and employees, and employer's NICs on employers, in relation to such loans.

This Practice Note sets out what constitutes an employment-related loan for the purposes of the benefits code. An employment-related loan is defined broadly and is deemed to include loans made by the employer and other associated persons. Loans made by prospective employers are also included in the definition.

As with any other kind of employment reward, if a loan is provided by a third party, rather than the employer, it is worth considering whether the disguised remuneration provisions in ITEPA 2003, Part 7A apply, as those rules take priority over most of the other rules for taxing employment income (including the benefits code). For more details, see: Disguised remuneration and EBTs—overview. Following the introduction of the disguised remuneration rules, the employment-related loans provisions in the benefits code are most likely to be of relevance to loans provided by the employing company itself (rather than a third party) or in instances where a particular exemption from the disguised remuneration rules is available.

In summary, where an employee or director (or a relative of an employee or director) is provided with an employment-related loan at

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