Qualifying and non-qualifying loans
The distinction between qualifying and non-qualifying loans is relevant to:
- the exemption for qualifying loans on which the whole of any interest would be eligible for relief
- aggregation and non-aggregation of loans
- the exemptions for small loans.
For more information on qualifying loans see EIM26120.
Exemptions for some qualifying loans
There is no chargeable benefit on some qualifying loans. Exemption applies if the whole of any interest on the loan (or any interest that would have been payable if the loan were interest bearing) qualifies for tax relief.
The exemption does not apply if only part of the loan qualifies for tax relief. In that case the full cash equivalent of the loan should be reported on form P11D. Any tax relief due to the employee should be claimed by the employee, usually on a self assessment tax return.
For example, a director has two interest free loans from his employer:
- a loan to purchase an interest in a partnership and
- a loan to purchase a car used partly for business and partly for private use.
The loan to purchase an interest in a partnership is exempt because if it were interest bearing all the interest would qualify for relief. The car loan is not exempt because no part of the interest would be eligible for relief.
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