Can director's loan interest be a trivial benefit?

Does a £30,000 loan for 13 days in a tax year give rise to a benefit in kind?

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My client has borrowed £30,000 from his close company on 17 March 2024.  At 2.25% the loan interest benefit in kind calculation gives a benefit of £24 for 2023/24 as the loan is only in place for 13 days.  I assumed this would not have to be reported on a P11D as it is less than £50 and hence covered by the trivial benefit rule.  However, when I come to look this up, I can’t find anywhere where it says that loan interest can be a trivial benefit.  The notes just say small amounts of interest are not charged if a negative director’s loan is less than £10,000, which is not the case here. Can any readers enlighten me please?

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By David Ex
11th May 2024 11:43

Does Section 323A ITEPA 2003 offer any clarity?

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By kim.shaw-and-co.com
11th May 2024 13:37

13 days is not a complete tax month, so there would not be a chargeable BIK in 2023/24 for that reason. That is because of simple arithmetics. The number of complete tax months the loan is outstanding in the tax year would amount to 0 so the liability arising would also be valued at 0.

If a loan made on 17th March 2024 remained outstanding after 5th May 2024 there would be a BIK in 2024/25, based on a positive balance on 5th April 2024 carried forward to the following tax year. That is because the loan would have existed for at least one tax month in 2024/25.

Beneficial loans cannot be classed as trivial benefits however small the liability is calculated to be - assuming a benefit came into point in the first place.

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By nrw2
11th May 2024 15:21

Why not pay the interest to extinguish any BIK?

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Replying to nrw2:
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By David Ex
11th May 2024 15:38

nrw2 wrote:

Why not pay the interest to extinguish any BIK?

Indeed. He could have paid double and still saved more in professional fees!

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By FactChecker
11th May 2024 15:41

As stated by kim.shaw-and-co.com, "Beneficial loans cannot be classed as trivial benefits however small the liability is calculated to be."

For future reference, a trivial benefit (where you don’t have to report or pay tax on a benefit for your employee) is ONLY where ALL of the following apply:
- it cost you £50 or less to provide,
- it isn’t cash or a cash voucher,
- it isn’t a reward for their work or performance,
- it isn’t in the terms of their contract.

Or per the full legislation ... https://www.legislation.gov.uk/ukpga/2016/24/section/13

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