Commentary on Sections Example 3 £150(Pe) – £50(E) = £100 Section 188: Loan released or written off: amount treated as earnings
733.This section treats employment-related loans which are released or written off as earnings. It derives from section 160 of ICTA.
734.Subsection (1) applies in the case of a continuing employment and treats the amounts written off as earnings for the year in which the loan is released or written off. It derives from section 160(2) but that section does not specify the tax year. See Note 7 in Annex 2.
735.Subsection (2) applies subsection (1) where an employment-related loan is released or written off after the employment has ceased or at a time when the employee is lower-paid in accordance with Chapter 11 of Part 3 of this Act. If the employment has ceased there is no taxable employment and the section would not apply. Deeming that the employment has not ceased allows the section to apply in the case of a release or writing off for the year in which the event occurs. It is also necessary for the employment to be one which is not an “excluded employment”; otherwise the section would not apply. Where the employment has become an “excluded employment” this subsection deems it not to be “excluded”. This derives from section 160(3) of ICTA.
736.Subsection (3) preserves chargeability where subsection (2) applies and a loan replaces the employment-related loan. It derives from section 160(3A) of ICTA.