EIM26142 - The benefits code: beneficial loans: exemptions from charge: small loans: example
Section 180(1) ITEPA 2003
This example shows how the exemption for small loans (where the total balance on all loans does not exceed £10,000 (£5,000 for 2013 to 2014 and earlier tax years), see EIM26140) applies. An employee had three interest free loans from his employer as follows:
| Purpose | Maximum balance outstanding |
|---|---|
| To pay for home improvements | £4,000 |
| To pay for a holiday | £4,000 |
| To buy his season ticket | £2,000 |
| Total | £10,000 |
Since the maximum total balance in the year is not more than £10,000 no tax is chargeable under section 175(1) ITEPA 2003.
Note that if at some time in the year the balances were:
| Purpose | Maximum balance outstanding |
|---|---|
| Home improvements loan | £4,100 |
| Holiday loan | £3,950 |
| Season ticket loan | £1,975 |
| Total | £10,025 |
exemption under section 180(1) ITEPA 2003 would not be due because the total balance has exceeded £10,000. See EIM26145 where the total balance exceeds £10,000, but the total of non-qualifying loans (see EIM26137) does not.