When is a staff loan a benefit?

ptee

Hello, might be an odd question but when is a staff loan considered a taxable benefit?
I used to have a staff mortgage from the bank where I work which meant our rate tracked the BoE base rate (so if BoE base rate was 5.5% our mortgage rate was 5.5%)
It was always classed as taxable benefit which cause year upon year of tax headaches.
The common thought at work is that it's not really a benefit as the bank I work at offers discounted tracker rates so most of the time I was on this staff mortgage the bank had cheaper rates on offer to the public.
The only real benefit was that it was fee free to set up and it was totally flexible when it came to overpayents.

So as the rate wasn't really discounted compared to the rates on offer to the public should it really be considered a taxable benefit???

(I'm sure there's a reasonable explanation for it :rolleyes: )

Cheers
Ptee

Elaine_Wilson

This is a very complex area and I must be careful not to write a book on the subject (or if I am going to then at least I ought to charge for it :rolleyes: ).

The basic rule is that if you have a loan where the interest rate is less than the "official rate" then there is a benefit. (I'm sure you know this from the wording of your question.)

Your best chance to get out of this is to invoke the rules laid down in Sections 176(1), (2) and (3) ITEPA 2003. These are explained in the Insector's own manuals at paragraph 26158 which can be found here.

The tricky bit might be that a substantial proportion of the loans made should be at rates comparable to the ones applicable to your loan. Quite how you ascertain this I have no idea. If the low rates were in fact only given to a very select few members of the public then your loan will not be exempt.

Not sure if this is any help but good luck with any claim.

ptee

Thanks Elaine, sounds like you know your stuff, I'll have read over that link.:beer:
It's a bit of a headache all this taxable benefit carry on (I know very little about it tbh).
I understand why it's there but I reckon there's hundereds of people in our company who have paid too much tax because they don't understand how it works and how much they should be paying. With the staff rate tracking the base rate each time the base rate changes the tax situation changes and its down to the employee to sort it (most don't!)

As it happens I queried it when I came off the staff mortgage and asked to have my tax reviewed, it turned out I'd overpaid by more than £900 over the last 2 years (which is :j now, but :mad: that they got so wrong then).

Anyway, thanks for you reply.

Pete