Rates of interest for used to benchmark against staff mortgages

Danish Ahmad made this Freedom of Information request to HM Revenue and Customs

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Dear HM Revenue and Customs,

Apologies for not being able to use the correct terminolgy here but you should be able to understand what I am trying to ask from the below.

My employer offers me a staff rate mortgage of 1.5% above base rate, which means I can at present, get a rate of 2%. It was only recently made aware to me that this will be treated as a benefit in kind. Why does HMRC choose to base the tax on the difference of the 4% (the benchmark rate) and 2% (my bank offer rate), meaning that I now have to pay 40% (my marginal tax rate) on the difference of (4-2%) = 2%. This almost effective rate of 2.5% makes it almost comparable with a market rate, thereby negating any staff benefit at all.

My question therefore: how does HMRC determine the benchmark rate and why dont they use a more representative rate (equitable) e.g. base rate + 1% rather than taxing us for every penny we have. This is a clear no win situation for either side, HMRC gets no taxes because I wont elect to take out a staff mortgage and I dont benefit from a lower rate.

This is flawd thinking whoever wrote this policy.

Yours faithfully,

Danish Ahmad

HM Revenue and Customs

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Dear Mr Ahmad

Please find attached acknowledgement for FOI 2839/11.

<<FOI 2839 D Ahmed - Acknowledgement.pdf>>

Yours sincerely

Freedom of the Information Team

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Dear Mr Ahmad,

Please find attached HMRC's response to your recent information request.

Yours sincerely

Teresa Chance

FOI Policy Adviser
Central Policy
Rm 1C/25
100 Parliament Street
London
SW1A 2BQ
Tel: 020 7147 3253
Fax: 020 7147 0666

The information in this e-mail and any attachments is confidential and may be subject to legal professional privilege. Unless you are the intended recipient or his/her representative you are not authorised to, and must not, read, copy, distribute, use or retain this message or any part of it. If you are not the intended recipient, please notify the sender immediately.

HM Revenue & Customs computer systems will be monitored and communications carried on them recorded, to secure the effective operation of the system and for lawful purposes.

The Commissioners for HM Revenue and Customs are not liable for any personal views of the sender.

This e-mail may have been intercepted and its information altered.

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Dear HM Revenue and Customs,

Thanks for your reply and information. How does one propose a change to this policy. Is this determined by Parliament or is this HMRC's own decision to determine the Official Interest Rate?

Yours faithfully,

Danish Ahmad

HM Revenue and Customs

Dear Mr Ahmad

Thank you for your follow up question.

As advised in our previous reply, section 181(1) of the Income Tax
Earning and Pensions Act 2003 confirms that the Official Rate of
Interest is to be used to calculate the taxable benefit of an employment
related loan. The Official Rate of Interest is set by regulations in
accordance with the powers provided by Section 178 Finance Act 1989 and
the current rate is set out in Regulation 5 of The Taxes (Interest Rate)
Regulations 1989 (as amended by The Taxes (Interest Rate) Amendment
Regulations SI2010/415).

HM Revenue and Customs are responsible for reviewing the Official Rate
of Interest and making recommendations on future rates or changes. The
final decision about introducing Regulations to Parliament in respect of
a change of rate is taken at a Ministerial level.

You may find the following information useful.

http://www.hm-treasury.gov.uk/contact_in...

Teresa Chance
FOI Policy Adviser
Central Policy
Rm 1C/25
100 Parliament Street
London
SW1A 2BQ
Tel: 020 7147 3253
Fax: 020 7147 0666

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