I am merely musing here and have done very little actual research to confirm or deny as yet, but thought I’d raise this for discussion.
If an employee’s salary is paid to a third party, regardless of it being paid to that third party, it remains taxable on the employee as it arises from their employment.
If the employer were to loan money to a member of that employees household, interest free, then the benefit arises on him as again, the benefit arises from his employment.
Say we have a family company. Owned 50:50 by maw and paw. Son works for it.
Son wants to start a property investment company but doesn’t have the cash. Neither do maw and paw, but their company does. To give him a start, their company lends his company £100k interest free.
Does a BIK arise on this loan? On son, or on parents ?
A third party has been placed in the way, but does that stop the BIK? If they paid his salary to the Ltd company, then it would remain taxable on the son.
Say the loan was written off. I’d say that at best it is a distribution to the parents, at worst a PAYE income for the son. It’s the company’s money after all that they are using for personal reasons.
A genuinely commercial rate of interest probably solves a lot of these problems, but when do client’s ever think things through before doing them.
Some thinking to do tomorrow me thinks, but comments welcome.