Finance Act 2017 amended the rules for when a Benefit in Kind (BIK) charge arises on preferential loan arrangements. A taxable BIK arises on the difference between the interest paid, if any, and the interest which would have been payable at the specified rate. This benefit is treated as an emolument of the employee’s employment.

Section 122 of the Taxes Consolidation Act (TCA) 1997 provides that a BIK charge in respect of preferential loans arises where loans are made to employees at a rate which is either nil or at a rate lower than normal commercial rates. The amendment made by Finance Act 2017 (to subsection 2 of section 122 TCA 1997) ensures that a taxable benefit arises in any year where the employee pays no interest or pays interest at a rate less than the specified rate.

Revenue Tax and Duty Manual Part 05-04-01 has been updated to reflect the Finance Act 2017 amendment.