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Tax treatment of loans from employee benefit schemes.
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12.— The Principal Act is amended in Chapter 2 of Part 33 by inserting the following after section 811A:
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“811B.— (1) In this section—
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‘benefit scheme’, subject to subsection (2)(c), means a trust, scheme or other arrangement and includes any settlement, disposition, covenant, agreement, transfer of money or transfer of other property or of any right to money or of any right to other property;
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‘employee’ includes an office holder and any person who is an employee within the definition of ‘employee’ in section 983;
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‘employer’ includes any person connected with an employer and any person who is an employer within the definition of ‘employer’ in section 983 or connected with such employer;
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‘loan’ means any loan, advance or any form of credit;
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‘specified rate’ means the rate specified in paragraph (iii) of the definition of ‘the specified rate’ in section 122.
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(2) For the purposes of this section—
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(a) any question whether a person is connected with another person shall be determined in accordance with section 10 (as it applies for the purposes of the Tax Acts),
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(b) the loan of, or the provision of the use of, an asset shall be deemed to be a loan of an amount equal to the value of that asset at the time such loan is made or at the time such asset is provided, and
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(c) an arrangement or agreement under which a loan, the provision of a benefit or the loan of, or the provision of the use of, an asset is made to an employee by his or her employer shall not be an arrangement or agreement within the meaning of a benefit scheme where the provisions of section 118, 118A, 121, 121A or 122 apply to such loan, the provision of such benefit or to the loan, or provision, of such asset.
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(3) Where, in the year of assessment 2013 or any subsequent year of assessment, an employee or former employee who holds or has held an office or employment the profits or gains from which are or were chargeable to tax under Schedule E or under Case III of Schedule D or any person connected with that employee or former employee receives, directly or indirectly, from a benefit scheme—
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(a) a payment (including a loan),
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(b) a benefit, or
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(c) an asset (including the loan of, or the provision of the use of, an asset),
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and that scheme was, directly or indirectly, provided, funded, subscribed to or otherwise made available by that employee’s employer or former employer, then—
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(i) the amount of that payment,
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(ii) the cost of providing that benefit or the value of that benefit at the date of provision (whichever is the greater), or
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(iii) the value of that asset,
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shall, to the extent that it is not otherwise chargeable to income tax, be deemed to be income of that employee for that year of assessment chargeable to income tax under Case IV of Schedule D.
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(4) Where, in the year of assessment 2013 or any subsequent year of assessment, an individual or any person connected with that individual receives, directly or indirectly, from a benefit scheme—
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(a) a payment (including a loan),
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(b) a benefit, or
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(c) an asset (including the loan of, or the provision of the use of, an asset),
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and that scheme was, directly or indirectly, provided, funded or otherwise made available by a person who subsequently becomes that individual’s employer, then for the year of assessment in which the individual first holds with that employer an office or employment the profits or gains from which are chargeable to tax under Schedule E or under Case III of Schedule D—
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(i) the amount of that payment,
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(ii) the cost of providing that benefit or the value of that benefit at the date of provision (whichever is the greater), or
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(iii) the value of that asset,
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shall, to the extent that it is not otherwise chargeable to income tax or is not liable in a territory with the government of which arrangements are for the time being in force by virtue of section 826(1) (or in a territory with the government of which arrangements have been made which on completion of the procedures set out in section 826(1) will have the force of law) to a tax that corresponds to income tax, be deemed to be income of that individual chargeable to income tax under Case IV of Schedule D.
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(5) For the purpose of subsections (3) and (4), this section applies to the receipt, directly or indirectly, on or after 13 February 2013 of a payment (including a loan), a benefit or an asset (including the loan of, or the provision of the use of, an asset) from a benefit scheme.
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(6) (a) Where an individual has paid all of the tax due by virtue of subsection (3) or (4) and that individual—
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(i) repays all or part of a loan,
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(ii) ceases, for a period of at least 12 months, to have use of an asset, or
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(iii) ceases, for a period of at least 12 months, to have use of a benefit,
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in respect of which those subsections applied, then, on foot of a claim in writing from that individual, relief shall be given by way of offset or repayment of an amount equal to the difference between—
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(I) where a loan has been repaid in full or where the use of the asset or benefit has ceased—
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(A) the tax paid by virtue of subsection (3) or (4), and
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(B) the tax that would have been payable by the individual as if section 118, 118A, 121, 121A or 122, as appropriate, had applied to such loan or to the provision of such asset or benefit up to the date that that loan is repaid or to the date that such asset or benefit ceases to be available to that individual, as the case may be,
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or
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(II) where a loan has not been repaid in full—
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(A) the amount of that tax paid by virtue of subsection (3) or (4) as is attributable to the amount of that loan repaid, and
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(B) the tax that would have been payable as if section 122 had applied in respect of the amount of the loan repaid up to the date that that amount is repaid.
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(b) The relief referred to in paragraph (a) shall not apply where the loan, or part of the loan, referred to in that paragraph is, directly or indirectly—
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(i) repaid by the individual referred to in that paragraph out of a payment (including a loan) or transfer of an asset to that individual, or to a person connected with that individual, from a benefit scheme that was, directly or indirectly, provided, funded, subscribed to or otherwise made available by the individual’s employer or former employer, or
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(ii) replaced by another loan that is directly or indirectly, provided, funded, subscribed to or otherwise made available by the individual’s employer or former employer.
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(c) Notwithstanding any limitation in section 865(4) on the time within which a claim for repayment of tax is required to be made or the provisions relating to the offset of tax in section 865B, a claim for the offset or repayment referred to in paragraph (a) shall be made within 4 years from the end of the year of assessment in which the loan, or part of the loan, is repaid or the use of the benefit or asset, as the case may be, ceases.
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(7) (a) This subsection applies for the year of assessment 2013 and each subsequent year of assessment where—
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(i) before 13 February 2013, an employee or former employee who holds or has held an office or employment the profits or gains of which are or were chargeable to tax under Schedule E or under Case III of Schedule D or any person connected with that employee or former employee received, directly or indirectly, from a benefit scheme—
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(I) a loan, or
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(II) the loan of, or the provision of the use of, an asset,
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and that scheme was, directly or indirectly, provided, funded, subscribed to or otherwise made available by that employee’s employer or former employer, and
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(ii) at any time in the year of assessment—
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(I) the loan referred to in subparagraph (i)(I), or any part thereof, remains outstanding, or
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(II) the employee or former employee continues to have the loan of or the use of the asset referred to in subparagraph (i)(II).
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(b) Where for any year of assessment that this subsection applies, then, in relation to a loan referred to in paragraph (a)(i)(I), an amount equal to—
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(i) if no interest is paid, the amount of interest that would have been payable in that year of assessment if interest had been payable at a rate equal to the specified rate, or
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(ii) if interest is paid at a rate less than the specified rate, the difference between the aggregate amount of interest paid in that year of assessment and the amount of interest which would have been payable in that year if interest had been payable at a rate equal to the specified rate,
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shall, if not otherwise chargeable to income tax, be deemed to be income of that employee or former employee for that year of assessment chargeable to income tax under Case IV of Schedule D and any reference to interest paid in subparagraph (i) or (ii) does not include an increase in the outstanding balance on the loan or loans or interest paid out of a further loan or advance made, directly or indirectly, by a benefit scheme or employer referred to in paragraph (a)(i).
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(c) Where for any year of assessment that this subsection applies, then, in relation to the provision of the loan of, or the provision of the use of, an asset referred to in paragraph (a)(i)(II), there shall, if not otherwise chargeable to income tax, be deemed to be income of that employee or former employee for that year of assessment chargeable to income tax under Case IV of Schedule D an amount equal to an amount that would, if section 118, 118A, 119, 121, 121A or 122 had applied in respect of the loan of, or the provision of the use of, that asset be deemed to be an expense, emolument or perquisite chargeable to tax under Schedule E by virtue of those sections.
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(8) This section shall not apply to a scheme approved for the purposes of Part 17 or 30.”.
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