SE01490 - Emoluments of employees and office holders: loans released or written off

Section 19(1)1 ICTA 1988

The release or writing off of a loan made to an employee by an employer is an emolument chargeable under Section 19 (1)1 ICTA 1988 if the writing off can only be ascribed to the fact that the borrower is an employee. It is an emolument 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.

As regards the writing off of a loan to a director or employee with emoluments at a rate of £8,500 a year or more see SE26114 and SE21740 onwards.