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Orders | |
170 Orders etc. relating to this Chapter | |
(1) The Treasury may by order substitute a greater amount for that for the time | |
being specified in— | |
(a) step 4 of section 121(1) (car: maximum interim sum), | 5 |
(b) section 126(3)(d) (car: minimum price of later accessory), | |
(c) section 132(3)(b) (car: maximum contributions deduction), | |
(d) section 147(1)(b) (classic car: minimum value), or | |
(e) section 147(7)(b) (classic car: maximum contributions deduction). | |
(2) An order under subsection (1) must specify the tax years to which it applies. | 10 |
(3) The Treasury may by order provide for a “lower threshold” different from that | |
specified in the Table in section 139(4) (car with a CO2 emissions figure) to | |
apply for tax years beginning on or after 6th April 2005 or such later date as | |
may be specified in the order. | |
(4) The Treasury may by regulations provide for the value of the appropriate | 15 |
percentage as determined under sections 139 to 141 to be reduced— | |
(a) by such amount, | |
(b) in such circumstances, and | |
(c) subject to such conditions, | |
as may be prescribed in the regulations. | 20 |
(5) The Treasury may by order substitute a different amount for that specified in | |
section 150(1) (car fuel: cash equivalent). | |
(6) An order under subsection (5) must specify the tax years to which it applies, | |
being tax years beginning after that in which it is made. | |
Supplementary | 25 |
171 Minor definitions: general | |
(1) In this Chapter— | |
“business travel”, in relation to any employee, means travelling the | |
expenses of which, if incurred and paid by the employee, would (if | |
Chapter 2 of Part 4 did not apply) be deductible under sections 337 to | 30 |
342, section 353 or under Chapter 5 of Part 5 (other than section 377); | |
“diesel” means any diesel fuel within the definition in Article 2 of | |
Directive 98/70/EC of the European Parliament and of the Council; | |
“EC certificate of conformity” means a certificate of conformity issued by | |
a manufacturer under any provision of the law of a Member State | 35 |
implementing Article 6 of Council Directive 70/156/EEC, as amended; | |
“EC type-approval certificate” means a type-approval certificate issued | |
under any provision of the law of a Member State implementing | |
Council Directive 70/156/EEC, as amended; | |
“relevant taxes” means any car tax, any value added tax, any customs or | 40 |
excise duty and any tax chargeable as if it were a customs duty; | |
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“road fuel gas” means any substance which is gaseous at a temperature of | |
15°C and under a pressure of 1013.25 millibars, and which is for use as | |
fuel in road vehicles; | |
“UK approval certificate” means a certificate issued under— | |
(a) section 58(1) or (4) of the Road Traffic Act 1988 (c. 52), or | 5 |
(b) Article 31A(4) or (5) of the Road Traffic (Northern Ireland) | |
Order 1981 (S.I. 1981/154 (N.I. 1)). | |
(2) In this Chapter references to the date of first registration in relation to a car or | |
van are to the date on which the vehicle was first registered under VERA 1994 | |
or under corresponding legislation of any country or territory. | 10 |
(3) In this Chapter references to the age of a car or a van at any time are to the | |
interval between the date of first registration of the vehicle and that time. | |
(4) In this Chapter “disabled person’s badge” means a badge— | |
(a) which is issued to a disabled person under section 21 of the Chronically | |
Sick and Disabled Persons Act 1970 (c. 44) or section 14 of the | 15 |
Chronically Sick and Disabled Persons (Northern Ireland) Act 1978 | |
(c. 53), or has effect as if it had been issued under one of those | |
provisions, and | |
(b) which is not required to be returned to the issuing authority under or | |
by virtue of the provision referred to in paragraph (a). | 20 |
172 Minor definitions: equipment to enable a disabled person to use a car | |
(1) In section 125(2)(c) “equipment to enable a disabled person to use a car” means | |
equipment— | |
(a) which is designed solely for use by a chronically sick or disabled | |
person, or | 25 |
(b) which is made available for use with the car because it enables a | |
disabled employee to use the car in spite of the disability. | |
(2) In this section— | |
“disabled employee” means an employee who, at the time when the car is | |
first made available to the employee, holds a disabled person’s badge, | 30 |
and | |
“the disability” means the disability entitling the disabled employee to | |
hold the disabled person’s badge. | |
Chapter 7 | |
Taxable benefits: loans | 35 |
Introduction | |
173 Loans to which this Chapter applies | |
(1) This Chapter applies to a loan if it is an employment-related loan. | |
(2) In this Chapter— | |
(a) “loan” includes any form of credit, and | 40 |
(b) references to making a loan (and related expressions) include | |
arranging, guaranteeing or in any way facilitating a loan. | |
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(3) Sections 288 and 289 make provision for exemption and relief for certain | |
bridging loans connected with employment moves. | |
174 Employment-related loans | |
(1) For the purposes of this Chapter an employment-related loan is a loan— | |
(a) made to an employee or a relative of an employee, and | 5 |
(b) of a class described in subsection (2). | |
(2) For the purposes of this Chapter the classes of employment-related loan are— | |
A | |
A loan made by the employee’s employer. | |
B | 10 |
A loan made by a company or partnership over which the employee’s | |
employer had control. | |
C | |
A loan made by a company or partnership by which the employer (being a | |
company or partnership) was controlled. | 15 |
D | |
A loan made by a company or partnership which was controlled by a person | |
by whom the employer (being a company or partnership) was controlled. | |
E | |
A loan made by a person having a material interest in— | 20 |
(a) a close company which was the employer, had control over | |
the employer or was controlled by the employer, or | |
(b) a company or partnership controlling that close company. | |
(3) In this section— | |
“employee” includes a prospective employee, and | 25 |
“employer” includes a prospective employer. | |
(4) References in this section to a loan being made by a person extend to a person | |
who— | |
(a) assumes the rights and liabilities of the person who originally made the | |
loan, or | 30 |
(b) arranges, guarantees or in any way facilitates the continuation of a loan | |
already in existence. | |
(5) A loan is not an employment-related loan if— | |
(a) it is made by an individual in the normal course of the individual’s | |
domestic, family or personal relationships, or | 35 |
(b) it is made to a relative of the employee and the employee derives no | |
benefit from it. | |
(6) For the purposes of this section a person (“X”) is a relative of another (“Y”) if X | |
is— | |
(a) Y’s spouse, | 40 |
(b) a parent, child or remoter relation in the direct line either of Y or of Y’s | |
spouse, | |
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(c) a brother or sister of Y or of Y’s spouse, or | |
(d) the spouse of a person falling within paragraph (b) or (c). | |
Benefit of taxable cheap loan treated as earnings | |
175 Benefit of taxable cheap loan treated as earnings | |
(1) The cash equivalent of the benefit of an employment-related loan is to be | 5 |
treated as earnings from the employee’s employment for a tax year if the loan | |
is a taxable cheap loan in relation to that year. | |
(2) For the purposes of this Chapter an employment-related loan is a “taxable | |
cheap loan” in relation to a particular tax year if— | |
(a) there is a period consisting of the whole or part of that year during | 10 |
which the loan is outstanding and the employee holds the employment, | |
(b) no interest is paid on it for that year, or the amount of interest paid on | |
it for that year is less than the interest that would have been payable at | |
the official rate, and | |
(c) none of the exceptions in sections 176 to 179 apply. | 15 |
(3) The cash equivalent of the benefit of an employment-related loan for a tax year | |
is the difference between— | |
(a) the amount of interest that would have been payable on the loan for | |
that year at the official rate, and | |
(b) the amount of interest (if any) actually paid on the loan for that year. | 20 |
(4) If there are two or more employment-related loans, this section applies to each | |
separately. | |
(5) This section is subject to— | |
section 180 (threshold for benefit of loan to be treated as earnings); | |
section 186 (replacement loans). | 25 |
176 Exception for loans on ordinary commercial terms | |
(1) A loan on ordinary commercial terms is not a taxable cheap loan. | |
(2) In this section a “loan on ordinary commercial terms” means a loan— | |
(a) made by a person (“the lender”) in the ordinary course of a business | |
carried on by the lender which includes— | 30 |
(i) the lending of money, or | |
(ii) the supplying of goods or services on credit, and | |
(b) in relation to which condition A, B or C is met. | |
(3) Condition A is met if— | |
(a) at the time the loan was made comparable loans were available to all | 35 |
those who might be expected to avail themselves of the services | |
provided by the lender in the course of the lender’s business, | |
(b) a substantial proportion of the loans (consisting of the loan in question | |
and the comparable loans) made by the lender at or about the time the | |
loan in question was made were made to members of the public, | 40 |
(c) the loan in question is held on the same terms as comparable loans | |
generally made by the lender to members of the public at or about the | |
time the loan in question was made, and | |
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(d) where those terms differ from the terms applicable immediately after | |
the loan in question was first made, they were imposed in the ordinary | |
course of the lender’s business. | |
(4) For the purposes of condition A a loan is comparable to another loan if it is | |
made for the same or similar purposes and on the same terms and conditions. | 5 |
(5) Condition B is met if— | |
(a) the loan has been varied before 6th April 2000, | |
(b) a substantial proportion of the relevant loans were made to members of | |
the public, | |
(c) the loan in question is held on the same terms as relevant loans | 10 |
generally made by the lender to members of the public at or about the | |
relevant time, and | |
(d) where those terms differ from the terms applicable immediately after | |
the relevant time, they were imposed in the ordinary course of the | |
lender’s business. | 15 |
(6) Condition C is met if— | |
(a) the loan has been varied on or after 6th April 2000, | |
(b) a substantial proportion of the relevant loans were made to members of | |
the public, | |
(c) at the relevant time members of the public who had loans from the | 20 |
lender for similar purposes had a right to vary their loans on the same | |
terms and conditions as applied in relation to the variation of the loan | |
in question, | |
(d) the loan in question as varied is held on the same terms as any existing | |
loans so varied, and | 25 |
(e) where those terms differ from the terms applicable immediately after | |
the relevant time, they were imposed in the ordinary course of the | |
lender’s business. | |
(7) For the purposes of condition B and C— | |
(a) the “relevant time” is the time of the variation of the loan in question, | 30 |
and | |
(b) the “relevant loans” are— | |
(i) the loan in question, | |
(ii) any existing loans which were varied at or about the relevant | |
time so as to be held on the same terms as the loan in question | 35 |
after it was varied, and | |
(iii) any new loans which were made by the lender at or about that | |
time and are held on those terms. | |
(8) No account is to be taken of amounts which are incurred on fees, commission | |
or other incidental expenses by the person to whom a loan is made for the | 40 |
purpose of obtaining the loan— | |
(a) in determining for the purposes of condition A whether loans made by | |
a lender before 1st June 1994 are made or held on the same terms or | |
conditions, or | |
(b) in determining for the purposes of condition B or C whether rights to | 45 |
vary loans are exercisable on the same terms and conditions or loans | |
are held on the same terms. | |
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(9) No account is to be taken of amounts which are incurred on penalties, interest | |
or similar amounts by the person to whom a loan is made as a result of varying | |
the loan in determining for the purposes of condition B or C whether rights to | |
vary loans are exercisable on the same terms and conditions or loans are held | |
on the same terms. | 5 |
(10) For the purposes of this section a “member of the public” means a member of | |
the public at large with whom the lender deals at arm’s length. | |
177 Exceptions for loans at fixed rate of interest | |
(1) A fixed rate loan made on or after 6th April 1978 is not a taxable cheap loan by | |
reason only of an increase in the official rate of interest since the year in which | 10 |
the loan was made if the condition in subsection (2) is met. | |
(2) The condition in this subsection is met if the amount of interest paid on the loan | |
for the tax year in which it was made was equal to or greater than the interest | |
that would have been payable at the official rate for that year. | |
(3) A fixed rate loan made before 6th April 1978 is not a taxable cheap loan if the | 15 |
condition in subsection (4) is met. | |
(4) The condition in this subsection is met if the rate of interest for the loan is equal | |
to or greater than the rate which could have been expected to apply to a loan | |
made— | |
(a) at the same time as the loan in question, | 20 |
(b) on the same terms (other than as to the rate of interest), and | |
(c) between persons not connected with each other dealing at arm’s length. | |
(5) In this section a “fixed rate loan” means a loan— | |
(a) made for a fixed period which cannot be changed, and | |
(b) made at a fixed rate of interest which cannot be changed during that | 25 |
period. | |
178 Exception for loans where interest qualifies for tax relief | |
A loan is not a taxable cheap loan in relation to a particular tax year if, | |
assuming interest is paid on the loan for that year (whether or not it is in fact | |
paid), the whole of that interest— | 30 |
(a) is eligible for relief under section 353 of ICTA (general provision for | |
relief for payments of interest, excluding MIRAS), | |
(b) would be eligible for relief under that section but for the fact that it is a | |
payment of relevant loan interest to which section 369 of ICTA applies | |
(mortgage interest payable under deduction of tax), | 35 |
(c) is deductible in computing the amount of the profits to be charged | |
under Case I or II of Schedule D in respect of a trade, profession or | |
vocation carried on by the person to whom the loan is made, or | |
(d) is deductible in computing the amount of the profits to be charged | |
under Schedule A in respect of a Schedule A business carried on by that | 40 |
person. | |
179 Exception for certain advances for necessary expenses | |
(1) An advance by an employer to an employee for the purpose of paying for— | |
(a) necessary expenses, or | |
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(b) incidental overnight expenses, | |
is not a taxable cheap loan in relation to a particular tax year if the following | |
conditions are met. | |
(2) The conditions are— | |
(a) that at all times in the tax year in question the amount outstanding on | 5 |
such advances made by the employer to the employee does not exceed | |
£1,000, | |
(b) that the advance is spent within 6 months after the date on which it is | |
made, and | |
(c) that the employee accounts to the employer at regular intervals for the | 10 |
expenditure of the amount advanced. | |
(3) If, on an application made by the employer, the Inland Revenue are satisfied | |
that there is good reason to do so in the case of a particular advance, they may | |
authorise that either or both of the following limits are increased in relation | |
that advance— | 15 |
(a) the sum of money specified in subsection (2)(a); | |
(b) the time limit specified in subsection (2)(b). | |
(4) An application under subsection (3)— | |
(a) must be in writing, and | |
(b) must contain such particulars and be supported by such evidence as the | 20 |
Inland Revenue may require. | |
(5) In this section “necessary expenses” are expenses (including travel expenses) | |
which— | |
(a) the employee is obliged to incur and pay as holder of the employment, | |
and | 25 |
(b) are necessarily incurred in the performance of the duties of the | |
employment. | |
(6) In this section “incidental overnight expenses” are expenses which— | |
(a) are incidental to the employee’s absence from the place where the | |
employee normally lives, | 30 |
(b) relate to a continuous period of such absence in relation to which the | |
overnight stay conditions are met, and | |
(c) would not be deductible under Part 5 if the employee incurred and paid | |
them and Chapter 2 of Part 4 (mileage allowances and passenger | |
payments) did not apply. | 35 |
(7) In subsection (6)(b) “the overnight stay conditions” has the same meaning as in | |
section 240 (exemption for incidental overnight expenses) (see section 240(4)). | |
180 Threshold for benefit of loan to be treated as earnings | |
(1) The cash equivalent of the benefit of an employment-related loan is not to be | |
treated as earnings of the employment for a tax year under section 175(1)— | 40 |
(a) if the normal £5,000 threshold is not exceeded, or | |
(b) where the loan is a non-qualifying loan and that threshold is exceeded, | |
if the £5,000 threshold for non-qualifying loans is not exceeded. | |
(2) The normal £5,000 threshold is not exceeded if at all times in the year the | |
amount outstanding on the loan (or, if two or more employment-related loans | 45 |
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