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Where Taxpayers and Advisers Meet

Fixed interest beneficial loan

Joined:Wed Aug 06, 2008 4:09 pm
Fixed interest beneficial loan

Postby dannyboy3010 » Tue Dec 30, 2008 10:56 pm

I am assuming the official interest rate for beneficial loans between company and employee will be reduced fairly soon.

If it does, I am considering making a fixed interest loan for a fixed period to take advantage of EIM26152. The terms of the loan would be something like:
1) Variable loan amount from company to employee
2) Fixed period of say 10 years
3) Fixed rate of interest will be official rate at the time the loan is initiated (currently 6.25% I think, but hopefully reducing soon)
4) Minimum loan of £100 must be maintained throughout the term of the loan

With the above terms, would I be able to take advantage of EIM26152? I will need to get it checked by HMRC anyway, as it says this exemption must be referred to an inspector.

I was hoping take take advantage of a cheap rate loan for 11 months of the year, which would be repaid in the 12th month (up to £100) to avoid S419 issues. Interest due on the loan would be actually paid to the company, as would the repayment in the 12th month.

Does this sound ok? Or are there any other issues I need to consider?

Joined:Wed Aug 06, 2008 3:44 pm

Re: Fixed interest beneficial loan

Postby taxattack » Tue Jan 06, 2009 3:48 pm

Among other things, have you looked at this?


Joined:Wed Aug 06, 2008 4:09 pm

Re: Fixed interest beneficial loan

Postby dannyboy3010 » Tue Jan 06, 2009 7:10 pm

Thanks Chris,

Yes I did read this, and it seems to suggest that a S419 bill will be charged if the loan repayment is simply a book entry, and not a genuine repayment of the loan:

"You should seek evidence that repayment took place and that any book entries reflect genuine underlying transactions. If there is no such evidence you should contend there is Section 419 liability, or challenge a claim for Section 419(4), on the grounds that no repayment of the loan was made"

Also the loan would be repaid up to £100 (not in total), and would not be withdrawn again for at least a month.


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