Jurisdiction(s):
United Kingdom

Related legal acts

Key definition

Loans definition

What does Loans mean? Loans are agreements to advance money on terms of repayment, usually with interest. In pensions practice, this covers any arrangement where occupational pension scheme assets are lent. In Great Britain, legislation defines “employer-related investments” and strictly restricts them: section 40 of the Pensions Act 1995 (mirrored in Northern Ireland legislation) and the Occupational Pension Schemes (Investment) Regulations 2005 prohibit loans to the sponsoring employer or to persons connected with, or associated with, the employer, and ban giving guarantees or security for the employer’s obligations. Other employer-related investments (such as employer shares or securities) are subject to a...

Writing off loans to directors or employees: UK income tax, PAYE and NICs treatment, benefits code, residual benefits and close company participator charges

Published by a LexisNexis Tax expert

Practice notes

Employers may, at times, make Loans available to directors or staff, either as part of the overall Remuneration package or on particular occasions to assist with major outlays. This Practice Note looks in detail at the income tax and National insurance contributions (NICs) consequences where the lender later writes off or releases such borrowing. It sets out the specific provisions within the benefits code in ITEPA 2003, Part 3 that govern ‘employment‑related loans’. For what amounts to an employment‑related loan, see Practice Note: Employment‑related loans—defined. Alongside the write‑off charges outlined below, if an employee or director (or a relative of either) receives an employment‑related loan that counts as a taxable cheap loan, there is an annual income tax and Class 1A NICs charge on the cash equivalent of the benefit enjoyed by the employee or director (subject to certain exceptions). For full details of when this yearly charge arises and the way it is calculated, refer to Practice Note: Tax issues on the provision of loans to employees or directors...

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Web page updated on 21/05/2026

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