Taxation of Chargeable Gains Act 1992 section 97A

Value of benefit conferred by capital payment made by way of loan

Section 97A sets out how to calculate the taxable benefit when a settlement makes a capital payment to a person in the form of a loan, for the purposes of the rules on attributing trust gains to beneficiaries.

• Where a capital payment is made by way of a loan, a taxable benefit arises for each tax year the loan remains outstanding.
• The annual benefit is the difference between interest calculated at the official rate and any interest actually paid by the borrower — if the official rate interest is higher, the excess is the benefit.
• If the borrower pays interest at or above the official rate, no benefit arises for that year.
• The "official rate" is the rate set under section 178 of the Finance Act 1989, which is the same rate used for taxing employment-related beneficial loans.