Sutton business advisers and accountants Harmer Slater are advising to study carefully the latest advice from HMRC if they are offering employment related cheap of interest free loans.
“An employee can obtain a benefit when provided with an employment-related cheap or interest-free loan. The benefit is the difference between the interest the employee pays, if any, and the commercial rate the employee would have to pay on a loan obtained elsewhere. These types of loans are referred to as beneficial loans,” said a spokesperson.
“The official rate of interest on beneficial loan arrangements will remain the same as last year at 3% with effect from 6 April 2016. A change in the rate is only made in the event of significant changes in interest rates. An employee can also benefit if an employment-related loan is released or written off. He or she is then no longer obliged to repay the amount that was lent.
“A benefit in kind will be applicable where a loan is provided at an interest rate of less than 3%. In addition employers must also pay Class 1A National Insurance premiums. There are a number of exempt activities where a beneficial loan might not need to be reported to HMRC. The most common is where the combined outstanding loan value to an employee is less than £10,000 throughout the whole tax year.”
Harmer Slater are an independent firm of chartered accountants and business advisers located in Sutton, close to central London with experience in dealing with listed and unlisted businesses operating across a range of industries in the UK and overseas. For full details go to HARMER