Income Tax (Earnings and Pensions) Act 2003 section 188

Loan released or written off: amount treated as earnings

Section 188 sets out the tax treatment when an employment-related loan is forgiven or written off, treating the amount released as taxable earnings from the employment.

• When an employer-related loan is wholly or partly released or written off, the amount forgiven is treated as taxable earnings from the employment for that tax year
• Even if the employment has ended or become lower-paid ministry employment, the forgiven amount is still taxable provided the loan was outstanding during a period when the employee held the employment on normal terms
• Any replacement loan that directly or indirectly takes the place of the original employment-related loan is itself treated as an employment-related loan tied to the original employment, provided it is not already linked to another employment
• Section 189 provides an exception to prevent a double tax charge arising on the same loan amount