Two Loans Not One Loan – Mrs E Amri v HMRC – Benefit in Kind Rules

A recent tribunal case was heard concerning the benefit in kind rules on beneficial loans to employees (Mrs E Amri v HMRC).  In what may be a more unusual situation, the case concerned an individual who was employed by a bank and was provided with loans with two different interest rates.

Background and Facts

The taxpayer was provided with two loans from the bank that she worked for, one for £35,000 at 5.5%, which was the Bank of England base rate at the time, and another for £105,000 at 6.24%.

The HMRC official rate of interest for beneficial loans at the time was 6.25%.

The smaller loan was a staff loan whilst the larger loan was provided at the bank’s normal commercial rate.

HMRC enquired into Mrs Amri’s return, and argued that the whole sum received should be treated as one loan and taxed as a benefit in kind.  By using the averaging method for calculating the loan, Mrs Armi was deemed by HMRC to have incurred a much higher benefit that she would have done on the £35,000 loan.

Arguments and Decision

HMRC argued that all sums advanced by reason of employment were covered by ITEPA 2003, s.173(2)(a).  As HMRC argued the amount advances were a single loan, this would mean that the whole loan was subject to a benefit in kind tax charge based on the average rate.

The taxpayer appealed on the basis that the two loans were distinct and as a result the loan of £105,000 was exempt by virtue of ITEPA 2003, s.176 as comparable loans could be taken by members of the public.

The tribunal agreed with the taxpayer and refuted HMRC’s argument that there was only one loan, allowing her appeal.  It was noted that HMRC had not provided any real evidence that there was only one loan, and Mrs Amri had stated that different terms applied to each.


The decision appears to be fair and common-sense.  What is more surprising is that the taxpayer was forced to take the case to tribunal to get the desired outcome and highlights the continuing trend of HMRC adopting aggressive stances where it is hard to identify the “mischief” they are targeting.