Net pay, Daniel.

Welcome the the forums Dan.

As Robert says, net pay.
Interest-free season ticket loans fall under the category of beneficial loans under HMRC regulations (see here) - they are tax free if the sum of any loans for a year in question is less than £10,000.
When people leave companies they should repay in total any outstanding balance - they can then canel the outstanding part of the season-ticket and claim back a refund (never 100%), this means that they are out of pocket but should really be part of their resignation decosion - have no pity, they can always ask for one from their new employer.....

In reply to Ray:

Hi Robert, Ray. Thanks for your advice! I thought it would be from net pay.
Robert, can I just check though that if the loan is under £10k it could be tax-free? Most of our season-ticket loans are in the £2-3k bracket, which would suggest that they could be deducted from gross pay?

In reply to Daniel:

Daniel

Loans up to £10,000 may be made interest free. The tax liability is on the 'interest free' bit, not the loan itself which will be repaid from net earnings. The interest saving is tax free, not the loan!

Loans above £10,000 need to be charged interest on or above the HMRC Beneficial Loan rate, which is currently 2.5% to avoid it being seen as a Benefit in Kind. Consequently any loan that is provided below this level of interest e.g. interest free, would attract a BiK tax liability on the interest payments saved.

For example a company provides a mortgage for one of its employees of say £200,000 at interest free. HMRC would view that in the first year as a BiK of 2.5% of the £200,000 - i.e. £5,000 - and the employee would have to pay tax at their marginal rate on that £5,000.

In reply to Robert James Munro:

that's very useful - many thanks!