SE03125 - Removal or transfer costs: eligible expenses and benefits - bridging loans - loans provided by the employer - example

Section 191B and Schedule 11A ICTA 1988

Mr A starts a new job on 1 February 1994. His employer makes him an interest-free bridging loan of £100,000 on 1 May 1994. The loan is repaid on 1 March 1995. His other qualifying removal expenses and benefits are £7,500. The time limit ( SE03104) expires on 5 April 1995. The official rate on 1 May 1994 is 7.5 per cent.

So in the formula

A = £500 (£8,000 - £7,500)

B = 365

C = £100,000

D = 7.5%

The result is rounded up to 25 and the loan is treated as having been made on 26 May 1994. The Section 160 ICTA 1988 charge is then calculated taking into account all the normal rules (SE26101onwards).

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 Section 160.

Note that the ordering of various types of loan (see SE26900- old SE3581 of Appendix 4) is not affected by this calculation. The actual start date of the loan is used for the purposes of a calculation under that paragraph.