EIM26257 – The benefits code: beneficial loans: calculating the cash equivalent: late interest payments: doubt about obligation to pay interest
Obligation to pay interest
You can only admit a claim to deduct interest paid when
calculating the cash equivalent of a beneficial loan (see
EIM26250) if a legal obligation to pay
the interest existed during the income tax year concerned. See
Morley-Clarke v Jones (59TC567).
If an employee claims that he or she was under a legal
obligation, which existed in the year concerned, to pay interest in
respect of a loan that was apparently interest-free, ask for
whatever evidence is available regarding the existence of that
obligation. If there is no evidence of such an obligation do not
allow the so-called interest when calculating the cash equivalent.
See
EIM26258 before setting down any appeal
for hearing by the Commissioners.
In particular do not admit a claim to relief under
EIM26255 in any case where:
- you are not satisfied that the employee was under a legal obligation to pay interest on an apparently interest-free loan, or
- so-called interest is paid under a retrospective agreement entered into after the end of the income tax year concerned.
