SE21741 - Benefits: loans written off: special rules

Section 160(2) and Section 160(3) ICTA 1988

Sometimes a loan or part of a loan is released or written off. This means the borrower does not have to repay the lender. It is also sometimes referred to as a loan being waived.

If a charge does not arise under Section 19(1)1 ICTA 1988 (See SE21740) a charge under Section 160(2) ICT A1988 will arise on a director or employee (within Part V Chapter II ICTA 1988) where:

• part or all of any loan made to him (or a relative of his) is released or written off and
• the benefit of the loan was obtained by reason of his employment.

For this purpose “relative” has the special meaning ascribed to it at SE26112 and “by reason of the employment” that described at SE26113.

The charge is subject to the exceptions in SE21742 .

The charge is made for the year the loan is released or written off. It applies whether or not the loan released or written off was a beneficial loan the benefit of which was chargeable on the employee under SE26101 onwards.

It may also apply when the employment has terminated ( SE21745 and SE 21746).

See SE21747 where the loan was made by the trustees of a settlement of which a director or his spouse is a settlor and SE21748 where a loan is released or written off by a close company.