The release or writing off of a loan made to an employee by an
employer is taxable as “earnings” within Section 62
ITEPA 2003 if the writing off can only be ascribed to the fact that
the borrower is an employee. It is earnings for the year the loan
is written off.
In Clayton v Gothorp (47TC168) a county council made a loan
to a health visitor to enable her to take a full-time training
course. Under the terms of the agreement with her employer the
obligation to repay the loan was to be cancelled if she served the
council as a health visitor for a further period after the end of
the course. She did so and claimed the lapse of the obligation to
repay the loan did not make it a chargeable emolument. The High
Court held it was a profit from the employment for the year of
assessment in which the obligation to repay ceased.
For directors and employees who are not in lower paid
employment the writing off of a loan may be taxable under the
benefits code if it is not taxable as earnings within Section 62
(see
EIM26114 and
EIM21740 onwards).
