Commentary on Sections Example 3 £150(Pe) – £50(E) = £100 Section 175: Benefit of taxable cheap loan treated as earnings
676.This section brings within the charge to tax the benefit arising on certain employment-related loans (each of which is referred to as a “taxable cheap loan”) on which no interest is paid or interest is paid at a low rate.
677.Subsections (1) and (2) provide that the cash equivalent of the benefit of a taxable cheap loan is treated as earnings from an employment. They also describe the circumstances in which an employment-related loan is a “taxable cheap loan”. They derive from section 160(1) of ICTA. Subsection (1) sets out for which year the cash equivalent is to be treated as earnings. See Note 7 in Annex 2.
678.Subsection (3) gives the broad rule for computing the cash equivalent of the benefit. Subsection (4) provides that in considering whether a loan falls within this Chapter it must be looked at separately from any other loan. They derive from section 160(4) and paragraph 3(1) of Schedule 7 to ICTA.
679.Subsection (5) is a signpost to section 180 of this Act (threshold for benefit of loan to be treated as earnings) which sets out the £5,000 threshold and to section 186 of this Act (replacement loans) which makes an exception to subsection (4).