Preferential Loans

Tax and Duty Manual Part 05-04-01 has been updated to reflect changes made to the tax treatment of preferential loans as a result of Finance Act 2017.

The Finance Act 2017 amendment ensures that a taxable benefit arises on an employee (or his or her spouse or civil partner) in any year where the employee pays no interest on an employer-provided loan or pays interest at a rate less than the specified rate.

Prior to Finance Act 2017, an employee in receipt of a preferential loan was charged to tax on the difference between:

• the amount of interest which would have been payable on the preferential loan if interest had been paid at the “specified rate”(as defined in Chapter 2)
• the amount of interest, if any, actually paid or payable on the loan.

(Source: Revenue)