Income Tax (Earnings and Pensions) Act 2003 section 554OA

Exclusions: transfer of employment-related loans

Section 554OA provides an exclusion from the Part 7A disguised remuneration charge when a small employment-related loan is transferred to a new employer, provided certain conditions are met.

• When an employee changes employer and the new employer takes over an existing employment-related loan, no Part 7A charge arises provided the loan balance stays within the £10,000 threshold
• The £10,000 limit applies to the total of all employment-related loans from the same employer outstanding at any point during the tax year, not just the individual loan being transferred
• Any amount transferred in respect of a loan counts as an amount outstanding for the purposes of testing against the £10,000 aggregate threshold
• The exclusion only applies where the borrower is an employee or prospective employee of the new employer, and there is no connection between the transfer and any tax avoidance arrangement