Beneficial Loan Arrangements
Specific legislation was introduced, with effect from 6 April 1978, to tax the benefit arising if loans are provided by an employer to an employee at a nil or low rate of interest. This applies to directors or higher-paid employees only and employees earning less than £8500 can take advantage of a beneficial loan arrangement without any tax liability arising, provided certain simple rules are followed. There must be no contractual entitlement to the provision of a loan, once granted it must not be transferable or assignable and it should not be ‘exchangeable’ for increased emoluments at the employee’s option.
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