Loan benefit after person ceases as director/employee

Loan benefit after person ceases as director...

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Husband and wife had a joint loan account, split 50/50 for bik. Company goes into administration and husband ceases as director/employee but wife carries on.

I believe the loan benefit on husband ceases in tax year following termination, but is the full loan then taxable on wife or just half of it? I am really unsure, but my guess is the full loan is taxable as the husband's share is o/s by reason of wife's employment?

Administrator is looking to agree write off of most of the loan - my thought is this has nothing to do with bik rules and so write off will be taxable on 50/50 split basis - is that right?

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By Paul Soper
03rd Feb 2015 16:18

Close company benefit in kind

Under the ITEPA rules it would seem that the loan benefit ceases as you describe but it the becomes provision to an associate and so taxable on the wife.

Writing off the loan will enable the company to recover the tax already paid under s455 and will be taxed as a dividend for income tax purposes - this treatment takes priority to any possible charge under ITEPA - curious but true.  However it could be regarded as remuneration for NIC purposes.

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