How JustAnswer Works:

  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.

Ask TonyTax Your Own Question

TonyTax
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15886
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
13905389
Type Your Tax Question Here...
TonyTax is online now

I have a forgivable loan from my employer - I received it

Customer Question

I have a forgivable loan from my employer - I received it when I joined the firm. The deal was that it would be forgiven over a 4 year period - 1/4, 1/4, 1/4, 1/4 on each anniversary of me joining the company. I was told that I would be responsible for paying back the tax on the loan and they also explained the fact that HMRC consider a loan to be a benefit in kind and work on the basis that you are making 3% on your money and you have to pay the tax on this amount. I wanted to ask if there is any way of appealing on this 3% - I think its ridiculous - find me a place that where you have risk free guaranteed return of 3% - impossible! In this era of almost zero interest rates this rule does not fit. Please give me your thoughts...
Assistant: Thank you. Can you provide any more details to help us find you the right Expert?
Customer: there is a lot of detail there - its effectively a tax question about forgivable loans.
Submitted: 9 months ago.
Category: Tax
Expert:  TonyTax replied 9 months ago.

Hi.

Your employer explained it incorrectly. The fact is that you have an interest free loan which you won't get from a commercial lender. That is why you have a taxable benefit in kind at 3% on which you will pay a maximum of 20% tax if you are a basic rate taxpayer, 40% if you are a higher rate taxpayer and 45% if you are an additional rate taxpayer. It's no different to a company car benefit. You get a nice car to drive with no running costs except fuel and you don't have to use your own savings or borrow at commercial rates to buy your own car, hence the taxable benefit in kind.

I hope this helps but let me know if you have any further questions.

TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15886
Experience: Inc Tax, CGT, Corp Tax, IHT, VAT.
TonyTax and other Tax Specialists are ready to help you
Customer: replied 9 months ago.
The point is the 3% is out dated and does not assume we are in a zero interest environment - this 3% has not changed over the years as interest rates have come down. In reality I could get a commercial loan for less than 3% IR.
Customer: replied 9 months ago.
anything?
Expert:  TonyTax replied 9 months ago.

Take a look at the official rate of interest history here. Its not based on deposit rates. It's based on lending rates.

Customer: replied 9 months ago.
Thank you
Expert:  TonyTax replied 9 months ago.

Thanks for accepting my answer.

What Customers are Saying:

 
 
 
  • Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help. Mary C.
< Previous | Next >
  • Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help. Mary C.
  • This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!! Alex
  • Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult. GP
  • I couldn't be more satisfied! This is the site I will always come to when I need a second opinion. Justin
  • Just let me say that this encounter has been entirely professional and most helpful. I liked that I could ask additional questions and get answered in a very short turn around. Esther
  • Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help. Mary C.
  • This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!! Alex
 
 
 

Meet The Experts:

 
 
 
  • Sam

    Sam

    Accountant

    Satisfied Customers:

    7088
    26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
< Previous | Next >
  • http://ww2.justanswer.co.uk/uploads/TA/Tax Expert/2013-8-21_231010_sam.64x64.jpg Sam's Avatar

    Sam

    Accountant

    Satisfied Customers:

    7088
    26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
  • http://ww2.justanswer.co.uk/uploads/BI/bigduckontax/2013-8-12_222058_1.64x64.jpg bigduckontax's Avatar

    bigduckontax

    Accountant

    Satisfied Customers:

    2333
    FCCA FCMA CGMA ACIS
  • http://ww2.justanswer.co.uk/uploads/TA/TaxRobin/2013-8-28_16186_femalebusinessprofessionalbinderhand11038485.64x64.jpg TaxRobin's Avatar

    TaxRobin

    Tax Consultant

    Satisfied Customers:

    524
    International tax
  • /img/opt/shirt.png taxadvisor.uk's Avatar

    taxadvisor.uk

    Chartered Certified Accountant

    Satisfied Customers:

    2845
    FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
  • http://ww2.justanswer.co.uk/uploads/MS/MsAM/2012-6-9_16426_anna.64x64.jpeg Anna's Avatar

    Anna

    Teacher, writer, biologist

    Satisfied Customers:

    270
    Great research skills, variety of work experiences, teaching experience.
  • http://ww2.justanswer.co.uk/uploads/PD/pdheslin/2012-6-6_232056_pambig.64x64.jpg pdheslin's Avatar

    pdheslin

    Consultant

    Satisfied Customers:

    51
    20+ years of internet site creation and search engine optimization. Dozens of search tools at my disposal.
 
 
 

Related Tax Questions