A director or employee obtains a benefit by reason of their employment when he or she, or any of their relatives, are provided with a cheap or interest free loan.
These loans are called beneficial loans.
An employee is chargeable to tax and the employer is liable for class 1A National Insurance on the difference between the official rate of interest and the interest, if any, paid.
The benefit can be calculated using either the Normal Averaging Method or the Alternative Precise Method.
|Loan at start of year + loan at end of year
|x||Months loan outstanding
|Sum of:||Loan outstanding on each day||x||Official rate on that day
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