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bigduckontax
bigduckontax, Accountant
Category: Tax
Satisfied Customers: 3817
Experience:  FCCA FCMA CGMA ACIS
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i'm being offered a ''forgivable loan '' by an employer . I

Customer Question

i'm being offered a ''forgivable loan '' by an employer . I understand the basic concepts but how does HMRC view these arrangements and what are the pitfalls from my point of view. The ''loan'' agreement will be separate from my employee contract and clearly states that the employer will will withold the taxable element and be responsible for paying the tax due at the end of the 3 yr term . . In other words from a 100k gross loan they will pay me the net amount only. One more caveat which could be interesting from my point of view . I expect to be working in Dubai by the time the loan becomes forgiveable and therefore it crossed my mind to ask them to give me the loan ''Gross'' as i would be exempt from UK tax whilst working under a Dubai contract . Your thoughts please..
Submitted: 2 years ago.
Category: Tax
Expert:  bigduckontax replied 2 years ago.
Hello, I'm Keith and happy to help you with your question.
Firstly, if you do go to work in Dubai make sure that as you leave you send a form P85 to your tax office. HMRC will then make you non resident for the tax year after you leave and also split the year of departure into two portions, one resident and one non resident. This will make life much easier all round.
HMRC have the following advice on such beneficial loans in they Information Sheet EIM26140:
'No tax is chargeable if the total balance outstanding on all beneficial loans does not exceed £10,000 throughout the year of assessment in question (£5,000 for 2013/14 and earlier tax years).'
Thus a great deal depends upon the amount of the loan. If it is below 10K, no worries, Dubai or not!
I do hope I have helped you with your problem.
Customer: replied 2 years ago.

hi..the loan will be as in my original question 100k gross

Expert:  bigduckontax replied 2 years ago.
I am sorry, I failed to notice the 100K! I will respond later in the day when I have returned from a medical appointment.
Customer: replied 2 years ago.

Relist: Other. not able to answer question within satisfactory timeframe..said was at a ''medical appointment'' and would come back later..

Customer: replied 2 years ago.

Relist: Other. no answers from anyone..is the question that diffilcult!

Expert:  bigduckontax replied 2 years ago.
Post to clear my question list.

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