Cheap loans

My client worked for a US bank. His 1999 and 2000 bonuses were paid to an employee trust based in Jersey. He received loans from the trust and paid a benefit in kind charge on ‘cheap loans’ until there was a change in the way the loans were handled.

The interest-free loans were repaid in June 2000. At the same time he received an advance from an unconnected bank and paid interest at 6.25%pa.

In October 2001 he ceased employment with the bank. In November 2001 the loans were repaid and he received new interest-free advances from the employee trust.

I am aware there may be an alternative tax charge if interest has not been paid on the capital advanced from the trust calculated by reference to the income arising in the trust and the beneficial loan interest charges.

All the examples I have seen...