Section 186: Replacement loans
722.This section prevents manipulation of the averaging method in section 182 of this Act where a loan which is later replaced is repaid part way through the month. So that complete months are included in the calculation the section treats the replacement loan as the original loan. It derives from paragraph 4(2) to (4) of Schedule 7 to ICTA.
723.Subsection (1) sets out the circumstances in which the provisions apply and deals with both the replacement by a further employment-related loan and the insertion of a loan which is not employment-related between two that are.
724.Subsection (2) treats all loans falling within subsection (1) as if they were one continuous loan.
725.Subsection (3) follows the practice of applying the treatment of one continuous loan not just to the calculation of the official rate of interest which would be paid for the year but also to any interest paid on the loans for the purpose of calculating the cash equivalent. This is a minor change to the law. See Change 33 in Annex 1.
726.Subsection (4) defines “further employment-related loan”.
