{"id":655,"date":"2019-03-06T00:00:00","date_gmt":"2019-03-06T00:00:00","guid":{"rendered":"http:\/\/taxbak.co.uk\/index.php\/2019\/03\/06\/loans-to-employees\/"},"modified":"2019-03-06T00:00:00","modified_gmt":"2019-03-06T00:00:00","slug":"loans-to-employees","status":"publish","type":"post","link":"http:\/\/taxbak.co.uk\/index.php\/2019\/03\/06\/loans-to-employees\/","title":{"rendered":"Loans to employees"},"content":{"rendered":"<p>A reminder that if your business makes a loan to your employees or their relatives this can create tax problems for both employees and employers. And please don&rsquo;t forget that the term &ldquo;employee&rdquo; includes directors, and also that loans to family members may be caught.<\/p>\n<p>For example, the employer will have an obligation to report a beneficial loan to HMRC (and pay Class 1A NIC) and the deemed benefit would be a taxable benefit in kind for the relevant employee. A beneficial loan is one that is interest free or the rate charged is below the &ldquo;official rate&rdquo; and the benefit is the difference between these interest rate charges.<\/p>\n<p>Fortunately, not all loans create a tax problem, certain loans are exempt from this reporting obligation. These could include loans employers provided:<\/p>\n<ul>\n<li>in the normal course of a domestic or family relationship as an individual (not as a company you control, even if you are the sole owner and employee),<\/li>\n<li>with a combined outstanding balance due from an employee of less than &pound;10,000 throughout the whole tax year,<\/li>\n<li>to an employee for a fixed and never changing period, and at a fixed and constant rate that was equal to or higher than HMRC&rsquo;s official interest rate when the loan was taken out &ndash; the official rate for 2018-19 is 2.5%,<\/li>\n<li>under identical terms and conditions as those provided to the public (this mostly applies to commercial lenders),<\/li>\n<li>that are &lsquo;qualifying loans&rsquo;, meaning all the interest charged to the loan account qualifies for tax relief.<\/li>\n<\/ul>\n<p>Loans written off also create a National Insurance Class 1 charge for the employee. They must be reported on a P11D and the employer has an obligation to deduct and pay Class 1 NIC from the employee&rsquo;s salary, on the amount written off for tax purposes.<\/p>\n<p>Calculating the taxable benefits for chargeable loans can be somewhat complex and readers are advised to take advice if they are unsure of their tax and NIC responsibilities.<\/p>\n<!-- -->","protected":false},"excerpt":{"rendered":"<p>A reminder that if your business makes a loan to your employees or their relatives this can create tax problems for both employees and employers. And please don&rsquo;t forget that the term &ldquo;employee&rdquo; includes directors, and also that loans to family members may be caught. For example, the employer will have an obligation to report [&hellip;]<\/p>\n","protected":false},"author":0,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"om_disable_all_campaigns":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[1],"tags":[],"class_list":["post-655","post","type-post","status-publish","format-standard","hentry","category-uncategorized","blog-left-layout","blog-style-postblock","","blog-alt-odd"],"jetpack_sharing_enabled":true,"jetpack_featured_media_url":"","_links":{"self":[{"href":"http:\/\/taxbak.co.uk\/index.php\/wp-json\/wp\/v2\/posts\/655","targetHints":{"allow":["GET"]}}],"collection":[{"href":"http:\/\/taxbak.co.uk\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/taxbak.co.uk\/index.php\/wp-json\/wp\/v2\/types\/post"}],"replies":[{"embeddable":true,"href":"http:\/\/taxbak.co.uk\/index.php\/wp-json\/wp\/v2\/comments?post=655"}],"version-history":[{"count":0,"href":"http:\/\/taxbak.co.uk\/index.php\/wp-json\/wp\/v2\/posts\/655\/revisions"}],"wp:attachment":[{"href":"http:\/\/taxbak.co.uk\/index.php\/wp-json\/wp\/v2\/media?parent=655"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/taxbak.co.uk\/index.php\/wp-json\/wp\/v2\/categories?post=655"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/taxbak.co.uk\/index.php\/wp-json\/wp\/v2\/tags?post=655"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}