Income Tax (Earnings and Pensions) Act 2003 section 180

Threshold for benefit of loan to be treated as earnings

Section 180 sets out the £10,000 threshold below which the taxable benefit arising from a cheap or interest-free employer loan is not treated as earnings for income tax purposes.

• If the total outstanding balance of all taxable cheap loans from an employer remains at or below £10,000 throughout the tax year, no taxable benefit arises
• Where the normal £10,000 threshold is exceeded, a separate £10,000 threshold applies to non-qualifying loans only — if the non-qualifying loans alone stay at or below £10,000, no tax charge arises on those loans
• A qualifying loan is one where the interest, if paid, would attract tax relief — for example, interest eligible for relief under ITA 2007, or interest deductible in computing UK trade or UK property business profits
• Both thresholds require that the relevant loan balance or aggregate balance never exceeds £10,000 at any point during the tax year, not merely on average