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Sam
Sam, Accountant
Category: Tax
Satisfied Customers: 16244
Experience:  26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
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I am about to join a new UK company as an employee, again in

Customer Question

I am about to join a new UK company as an employee, again in the UK. I shall be paid via PAYE
The company is considering the option of giving me a company loan against future commissions/bonuses earned until the loan has been paid off. The idea is that the interest-free loan is to be paid to me on Day 1 of me joining.
The company seem to be unclear and nervous of any tax implications and whether this is seen as a 'benefit in kind'. I DO NOT want my base salary etc., to be affected. I want to start the job with the agreed base salary and have my commissions/bonuses earned used to pay of the loan. Once the loan has been paid, I can receive my commission and bonus payments in addition to my my monthly salary.
The question is, how would my new company do this, i,e. pay me the loan and can you please explain in detail how this would work and the tax implications?
As I said, I do not want my base salary recognition etc., on my P60 etc., to be affected. Is a P11D involved, if so, how?
Please kindly explain in simple terms but with full details.
Submitted: 15 days ago.
Category: Tax
Expert:  Sam replied 15 days ago.

Hi, Sam here , one of the UK tax Experts here on Just Answer, thank you for your question and I shall reply shortly

Expert:  Sam replied 15 days ago.

Hi

What exactly is this loan for ?

Thanks

Sam

Customer: replied 15 days ago.
Hi Sam. Thanks for responding. It's for personal reasons. As part of my negotiations for the job I was hoping for a lump sum payment as a sign-on fee (which is quite common). They company refused this initially. The reason is that in this new job, my net take-home pay is likely to be less than I earn right now, so I needed some money to make up for that. I then suggested a 'loan' whereby my future commissions/bonuses once I start the new job would be used to pay it back.
Expert:  Sam replied 15 days ago.

Hi

This is illegal and its call loan remuneration scheme and you will be fined heavily in entering into this arrangement as well as being charged loan charges by HMRC

As this evades the correct tax due and is not a benefit in kind

But if they make it as a clear beneficial loan on which you will pay tax at your highest rate of tax and they suffer 13.8% on the arrangement then its possible

However its not a good idea as they are not a loan company

Thanks

Sam

Customer: replied 15 days ago.
Hi Sam. So what would you recommend as a solution?
Customer: replied 15 days ago.
I mean whereby I don't pay any tax and the company do not incur any charges?
If they paid me the amount as a sign-on fee, would that work?
Expert:  Sam replied 15 days ago.

Hi

There isnt one other than accept the salary given knowing you will have the capacity to make commission and bonuses and be paid and taxed them at the right time

Or the only legal way is that they pay you a signing bonus in your salary on the first moth pay day and you suffer the appropriate tax at that time (which is not uncommon for employers to do)

Thanks

Sam

Thanks

sam