EIM03125 - Removal or transfer costs: expenses and benefits to which Section 271 ITEPA 2003 applies: bridging loans: loans provided by the employer: example
Section 284 ITEPA 2003
An employee starts a new job on 1 February 2004. »Ê¹ÚÌåÓýappIr employer makes them an interest-free bridging loan of £100,000 on 1 May 2004. »Ê¹ÚÌåÓýapp loan is repaid on 1 March 2005. »Ê¹ÚÌåÓýappIr other qualifying removal expenses and benefits are £7,500. »Ê¹ÚÌåÓýapp time limit (see EIM03104) expires on 5 April 2005. »Ê¹ÚÌåÓýapp official rate on 1 May 2004 is 5%.
So in the formula in step 3 at EIM03124:
A = £500 (£8,000 - £7,500)
B = £100,000
C = 5%
(£500 × 365) ÷ (£100,000 × 5%) = 36.5
»Ê¹ÚÌåÓýapp result is rounded up to 37 and the loan is treated as having been made on 8 June 2004. »Ê¹ÚÌåÓýapp charge under Part 3 Chapter 7 ITEPA 2003 is then calculated taking into account all the normal rules (see EIM26101 onwards).
If the loan is repaid before the end of the number of days calculated by using the formula there is no charge to tax under Part 3 Chapter 7.