Public workers given starter home tax help

11 Oct 01
Key workers will not be taxed on loans they receive under the Starter Home Initiative providing the money does not come directly from their employer.

12 October 2001

Instead, registered social landlords or alternative scheme administrators will have to take responsibility for advancing loans and other forms of financial assistance.

Government guidance published earlier this year suggested that workers such as teachers and nurses might have to pay extra tax and national insurance contributions (NICs) because the interest-free or low-interest loans they were receiving would be seen as a benefit in kind.

But updated guidance from the Department for Transport, Local Government and the Regions makes it clear that tax or NICs will not be charged on loans exceeding £5,000 where an employer plays no part in arranging them. Under current Inland Revenue rules, tax and NICs are not paid on loans of less than £5,000.

All but ten of the 95 schemes receiving a total of £250m under the Starter Home Initiative are led by RSLs. They and other administrators will need to run their schemes independently of the local authority or employer whose workers stand to gain, says updated guidance.

It warns: 'If an employer nominates its employees to receive Starter Home Initiative assistance or has a say in the selection of individual applicants for SHI funds, this would be viewed as the employer arranging or facilitating the loan and tax/NICs would be chargeable.'

Employers will not be regarded as facilitating loans where a scheme is run for a group in a particular area, or where they provide information about skill shortages which is used to prioritise applicants.


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