BENEFICIAL LOAN ARRANGEMENTS (Hansard, 20 April 1994)

§ The Financial Secretary to the Treasury (Mr. Stephen Dorrell)
I beg to move amendment No. 2, in page 68, line 45, at end insert— '( ) In determining for the purposes of section 161(1A) and (1B) of that Act (inserted by this section) whether any loans made by any person before 1st June 1994 are made or held on the same terms or conditions, there shall be left out of account any amounts, by way of fees, commission or other incidental expenses, incurred for the purpose of obtaining any of those loans by the persons to whom they are made.' This is a minor extension to the provision that we introduced to stop employees having to pay income tax on loans from their employers where employers make loans to the public on the same terms. For loans made before 1 June 911 1994, the amendment disregards differences between loans to employees and loans to the public caused by the incidental cost of obtaining the loans. That is a small change, but I believe that it will be welcomed by the employees and employers affected, and also by the Inland Revenue, because it will simplify the system.

§ Mr. Nicholas Brown (Newcastle upon Tyne, East)
As I understand it, the purpose of the amendment is simply to deal with the administrative costs involved in the making of the loan, so it is intended to be an even smaller alteration than the Financial Secretary to the Treasury suggested, because typically those costs are about £100 per transaction. I should welcome an assurance from the Minister that, in the Government's view, the amendment represents simply a tidying up of the original proposition that we discussed in Committee, and that there is no scope for rejigging the arrangements that could allow any unwanted and unwelcome avoidance.

§ Mr. Dorrell
This is indeed a tidying-up measure. It is slightly more important for the employees concerned than the hon. Gentleman suggests, because under the law as originally written, the fact that an employee had not had to pay a £100 management charge would mean not only that he would not receive the tax concession on the £100 but that he would not receive it at all. That would come about because the public would have to pay the administration charge, so technically the loan would not have been made available on the same terms as loans made to a wider public.
The purpose of the amendment is to tidy up the effects of the clause in that specific set of circumstances. It applies only to loans made before 1 June 1994, because it seems reasonable that, after that date, employers should ensure that if employees are to benefit from the terms of the provision, they must make available to them loans on precisely the same terms as those available to a wider public.