http://www.legislation.gov.uk/id/ukpga/2003/1

Part 3Employment income: earnings and benefits etc. treated as earnings

Chapter 1Earnings

62Earnings

1

This section explains what is meant by “earnings” in the employment income Parts.

2

In those Parts “earnings”, in relation to an employment, means—

a

any salary, wages or fee,

b

any gratuity or other profit or incidental benefit of any kind obtained by the employee if it is money or money’s worth, or

c

anything else that constitutes an emolument of the employment.

3

For the purposes of subsection (2) “money’s worth” means something that is—

a

of direct monetary value to the employee, or

b

capable of being converted into money or something of direct monetary value to the employee.

4

Subsection (1) does not affect the operation of statutory provisions that provide for amounts to be treated as earnings (and see section 721(7)).

Chapter 2Taxable benefits: the benefits code

The benefits code

63The benefits code

1

In the employment income Parts “the benefits code” means—

this Chapter,
Chapter 3 (expenses payments),
Chapter 4 (vouchers and credit-tokens),
Chapter 5 (living accommodation),
Chapter 6 (cars, vans and related benefits),
Chapter 7 (loans), F73and
F64...
F64...
Chapter 10 (residual liability to charge)
F70...

F2202

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F2203

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F2204

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F2705

The benefits code has effect subject to section 554Z2(2).

in any other circumstances,

give an entitlement to receive more than 5% of the assets which would then be available for distribution among the participators.

4

In this section—

“associate” has the meaning given by F224section 448 of CTA 2010 except that, for this purpose, “relative” in F67section 448(1) has the meaning given by subsection (5) below, and
“participator” has the meaning given by F222section 454 of CTA 2010.

5

For the purposes of this section a person (“A”) is a relative of another (“B”) if A is—

a

B’s spouse F138or civil partner,

b

a parent, child or remoter relation in the direct line either of B or of B’s spouse F138or civil partner,

c

a brother or sister of B or of B’s spouse F138or civil partner, or

d

the spouse F138or civil partner of a person falling within paragraph (b) or (c).

69Extended meaning of “control”

1

The definition of “control” in F141section 995 of ITA 2007 (which is applied for the purposes of this Act by section 719) is extended as follows.

2

For the purposes of the benefits code that definition applies (with the necessary modifications) in relation to an unincorporated association as it applies in relation to a body corporate.

69AF310Optional remuneration arrangements

1

Subsections (2) to (7) have effect for the purposes of the benefits code.

2

A benefit provided for an employee is provided under “optional remuneration arrangements” so far as it is provided under arrangements of type A or B (regardless of whether those arrangements are made before or after the beginning of the person's employment).

3

“Type A arrangements” are arrangements under which, in return for the benefit, the employee gives up the right (or a future right) to receive an amount of earnings within Chapter 1 of Part 3.

4

“Type B arrangements” are arrangements (other than type A arrangements) under which the employee agrees to be provided with the benefit rather than an amount of earnings within Chapter 1 of Part 3.

5

A benefit provided for an employee is to be regarded as provided under optional remuneration arrangements (whether of type A or type B) so far as it is just and reasonable to attribute the provision of the benefit to the arrangements in question.

6

Where a benefit is provided for an employee under any arrangements, the mere fact that under the arrangements the employee makes good, or is required to make good, any part of the cost of provision is not to be taken to show that the benefit is (to any extent) provided otherwise than under optional remuneration arrangements.

7

Where a benefit is provided for an employee partly under optional remuneration arrangements and partly otherwise than under such arrangements, the benefits code is to apply with any modifications (including provision for just and reasonable apportionments) that may be required for ensuring that the benefit is treated—

a

in accordance with the relevant provision in the column 2 of the table so far as it is provided under optional remuneration arrangements, and

b

in accordance with the relevant provision in column 1 of the table so far as it is provided otherwise than under such arrangements.

Column 1	Column 2
Section	Section
81(1)	81(1A)(b)
87(1)	87A(1)(a)
94(1)	94A(1)(a)
102(1A)	102(1B)(b)
120(1)	120A(1)(a)
149(1)	149A(2)(a)
154(1)	154A(1)(a)
160(1)	160A(2)(a)
175(1)	175(1A)(b)
203(1)	203A(1)(a)

69BOptional remuneration arrangements: supplementary

1

For the purposes of the benefits code “the amount foregone”—

a

in relation to a benefit provided for an employee under type A arrangements means the amount of earnings mentioned in section 69A(3);

b

in relation to a benefit provided for an employee under type B arrangements means the amount of earnings mentioned in section 69A(4);

c

in relation to a benefit provided for an employee partly under type A arrangements and partly under type B arrangements, means the sum of the amounts foregone under the arrangements of each type.

2

Subsection (3) applies where, in order to determine the amount foregone with respect to a particular benefit mentioned in section 69A(3) or (4), it is necessary to apportion an amount of earnings to the benefit.

3

The apportionment is to be made on a just and reasonable basis.

4

In this section and section 69A references to a benefit provided for an employee include a benefit provided for a member of an employee's family or household.

5

In this section and section 69A—

“benefit” includes any benefit or facility, regardless of its form and the manner of providing it;
“earnings” means earnings within Chapter 1 of Part 3 (and includes a reference to amounts which would have been such earnings if the employee had received them).

Chapter 3Taxable benefits: expenses payments

70Sums in respect of expenses

1

This Chapter applies to a sum paid to an employee in a tax year if the sum—

a

is paid to the employee in respect of expenses, and

b

is so paid by reason of the employment.

2

This Chapter applies to a sum paid away by an employee in a tax year if the sum—

a

was put at the employee’s disposal in respect of expenses,

b

was so put by reason of the employment, and

c

is paid away by the employee in respect of expenses.

3

For the purposes of this Chapter it does not matter whether the employment is held at the time when the sum is paid or paid away so long as it is held at some point in the tax year in which the sum is paid or paid away.

4

References in this Chapter to an employee accordingly include a prospective or former employee.

5

This Chapter does not apply to the extent that the sum constitutes earnings from the employment by virtue of any other provision.

71Meaning of paid or put at disposal by reason of the employment

1

If an employer pays a sum in respect of expenses to an employee it is to be treated as paid by reason of the employment unless—

a

the employer is an individual, and

b

the payment is made in the normal course of the employer’s domestic, family or personal relationships.

2

If an employer puts a sum at an employee’s disposal in respect of expenses it is to be treated as put at the employee’s disposal by reason of the employment unless—

a

the employer is an individual, and

b

the sum is put at the employee’s disposal in the normal course of the employer’s domestic, family or personal relationships.

72Sums in respect of expenses treated as earnings

1

If this Chapter applies to a sum, the sum is to be treated as earnings from the employment for the tax year in which it is paid or paid away.

2

Subsection (1) does not prevent the making of a deduction allowed under any of the provisions listed in subsection (3).

3

The provisions are—

section 336 (deductions for expenses: the general rule);
section 337 (travel in performance of duties);
section 338 (travel for necessary attendance);
section 340 (travel between group employments);
F301section 340A (travel between linked employments);
section 341 (travel at start or finish of overseas employment);
section 342 (travel between employments where duties performed abroad);
section 343 (deduction for professional membership fees);
section 344 (deduction for annual subscriptions);
section 346 (deduction for employee liabilities);
section 351 (expenses of ministers of religion);
section 353 (deductions from earnings charged on remittance).

Chapter 4Taxable benefits: vouchers and credit-tokens

Cash vouchers: introduction

73Cash vouchers to which this Chapter applies

1

This section applies where—

a

the expense incurred by the person at whose cost a voucher, stamp or similar document is provided (“the provision expense”) includes costs to that person of providing sickness benefits (“sickness benefits costs”),

b

the voucher, stamp or document would be a cash voucher (apart from this section) but for the fact that the sum of money for which it is capable of being exchanged (“the exchange sum”) is substantially less than the provision expense, and

c

the whole or part of the difference between the exchange sum and the provision expense represents the sickness benefits costs.

2

The voucher, stamp or document is a cash voucher within the meaning of this Chapter if—

E = PE - D

E is not substantially less than PE - D

where—

E is the exchange sum,

PE is the provision expense, and

D is the amount of the difference between E and PE which represents the sickness benefits costs.

3

In this section “sickness benefits” mean benefits in connection with sickness, personal injury or death.

77Apportionment of cost of provision of voucher

If a person incurs expense in or in connection with the provision of vouchers, stamps or similar documents for two or more employees as members of a group or class, the expense incurred in respect of one of them is to be such part of that expense as is just and reasonable.

Cash vouchers: exceptions

78Voucher made available to public generally

This Chapter does not apply to a cash voucher if—

a

it is of a kind made available to the public generally, and

b

it is provided to the employee or a member of the employee’s family on no more favourable terms than to the public generally.

79Voucher issued under approved scheme

b

in any other way,

is to be treated for the purposes of this Chapter as having been received by the employee at the time when it is appropriated.

83Provision for, or receipt by, member of employee’s family

For the purposes of this Chapter any reference to a non-cash voucher being provided for or received by an employee includes a reference to it being provided for or received by a member of the employee’s family.

Meaning of “non-cash voucher”

84Meaning of “non-cash voucher”

1

In this Chapter “non-cash voucher” means—

a

a voucher, stamp or similar document or token which is capable of being exchanged for money, goods or services,

F45ab

a childcare voucher,

b

a transport voucher, or

c

a cheque voucher,

but does not include a cash voucher.

2

For the purposes of subsection (1)(a) it does not matter whether the document or token is capable of being exchanged—

a

singly or together with other vouchers, stamps, documents or tokens;

b

immediately or only after a time.

F1472A

In this Chapter “childcare voucher” means a voucher, stamp or similar document or token intended to enable a person to obtain the provision of care for a child (whether or not in exchange for it).

3

In this Chapter “transport voucher” means a ticket, pass or other document or token intended to enable a person to obtain passenger transport services (whether or not in exchange for it).

4

In this Chapter “cheque voucher” means a cheque—

a

provided for an employee, and

b

intended for use by the employee wholly or mainly for payment for—

i

particular goods or services, or

ii

goods or services of one or more particular classes;

and, in relation to a cheque voucher, references to a voucher being exchanged for goods or services are to be read accordingly.

Non-cash voucher: exceptions

85Non-cash voucher made available to public generally

This Chapter does not apply to a non-cash voucher if—

a

it is of a kind made available to the public generally, and

b

it is provided to the employee or a member of the employee’s family on no more favourable terms than to the public generally.

86Transport vouchers under pre-26th March 1982 arrangements

1

This Chapter does not apply to a transport voucher provided for an employee of a passenger transport undertaking under arrangements in operation on 25th March 1982 which meet the condition in subsection (2).

2

The condition is that the arrangements are intended to enable the employee or a member of the employee’s family to obtain passenger transport services provided by—

a

the employer,

b

a subsidiary of the employer,

c

a body corporate of which the employer is a subsidiary, or

d

another passenger transport undertaking.

3

In this section—

“passenger transport undertaking” means an undertaking whose business consists wholly or mainly in the carriage of passengers or a subsidiary of such an undertaking, and
“subsidiary” means a wholly-owned subsidiary within the meaning of section F2531159 of and Schedule 6 to the Companies Act F2802006.

by the person at whose cost they are provided.

F253A

In the case of a childcare voucher, the reference in subsection (3)(b) to the services for which the voucher is capable of being exchanged is to the provision of care for a child which may be obtained by using it.

4

In the case of a transport voucher, the reference in subsection (3)(b) to the services for which the voucher is capable of being exchanged is to the passenger transport services which may be obtained by using it.

5

If a person incurs expense in or in connection with the provision of non-cash vouchers for two or more employees as members of a group or class, the expense incurred in respect of one of them is to be such part of that expense as is just and reasonable.

F606

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

For the purposes of subsections (2) and (3), assume that the cost of provision is zero if the condition in subsection (8) is met.

8

The condition is that the non-cash voucher would be exempt from income tax but for section 228A (exclusion of certain exemptions).

88Year in which earnings treated as received

In this section “cost of provision” has the same meaning as in section 94.

General supplementary provisions

95Disregard for money, goods or services obtained

1

This section applies if the cash equivalent of the benefit of a cash voucher, a non-cash voucher or a credit-token F85or the relevant amount in respect of a cash voucher, a non-cash voucher or a credit-token —

a

is to be treated as earnings from an employee’s employment under this Chapter, F152...

F152b

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2

Money, goods or services obtained—

a

by the employee or another person in exchange for the cash voucher or non-cash voucher, or

b

by the employee or a member of the employee’s family by use of the credit-token,

are to be disregarded for the purposes of the Income Tax Acts.

3

But the goods or services are not to be disregarded for the purposes of applying sections 362 and 363 (deductions where non-cash voucher or credit-token provided).

F2253A

In the case of a childcare voucher, the reference in subsection (2)(a) to the services obtained in exchange for the voucher is to the provision of care for a child obtained by using it.

4

In the case of a transport voucher, the reference in subsection (2)(a) to the services obtained in exchange for the voucher is to the passenger transport services obtained by using it.

F24196Dispensations relating to vouchers or credit-tokens

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

96AF304Power to exempt use of non-cash vouchers or credit-tokens to obtain exempt benefits

1

The Treasury may by regulations provide for exemption from any liability that would otherwise arise by virtue of this Chapter in respect of—

a

non-cash vouchers which are or can be used to obtain specified exempt benefits, or which evidence an employee's entitlement to specified exempt benefits;

b

credit-tokens which are used to obtain specified exempt benefits.

2

In this section—

“exempt benefit” means a benefit the direct provision of which is exempted from liability to income tax by a provision of Part 4 (employment income: exemptions), and
“specified” means specified in the regulations.

3

Regulations under this section may operate by amending section 266 (exemption of non-cash vouchers for exempt benefits) or section 267 (exemption of credit-tokens used for exempt benefits).

Chapter 5Taxable benefits: living accommodation

Living accommodation

97Living accommodation to which this Chapter applies

1

This Chapter applies to living accommodation provided for—

a

an employee, or

b

a member of an employee’s family or household,

by reason of the employment.

F1961A

Where this Chapter applies to any living accommodation—

a

the living accommodation is a benefit for the purposes of this Chapter (and accordingly it is immaterial whether the terms on which it is provided to any of those persons constitute a fair bargain), and

b

sections 102 to 108 provide for F217an amount in respect of the benefit of the living accommodation to be treated as earnings.

2

Living accommodation provided for any of those persons by the employer is to be regarded as provided by reason of the employment unless—

a

the employer is an individual, and

b

the provision is made in the normal course of the employer’s domestic, family or personal relationships.

Exceptions

98Accommodation provided by local authority

F261In section 102 (benefit of accommodation treated as earnings) subsection (1A) (accommodation provided otherwise than pursuant to optional remuneration arrangements) does not apply to living accommodation provided for an employee if—

a

the employer is a local authority,

b

it is provided for the employee by the authority, and

c

the terms on which it is provided are no more favourable than those on which similar accommodation is provided by the authority for persons who are not their employees but whose circumstances are otherwise similar to those of the employee.

special security arrangements are in force, and

c

the employee resides in the accommodation as part of those arrangements.

100AF1Homes outside UK owned through company etc

1

Benefit of living accommodation treated as earnings

102Benefit of living accommodation treated as earnings

1

F197This section applies if living accommodation to which this Chapter applies is provided in any period (“the taxable period”) —

a

The condition is that the benefit of the accommodation would be exempt from income tax but for section 228A (exclusion of certain exemptions).

7

If the cost of providing the living accommodation does not exceed £75,000, the “deductible amount” means any sum made good, on or before 6 July following the tax year which contains the taxable period, by the employee to the person at whose cost the accommodation is provided that is properly attributable to its provision.

8

If the cost of providing the living accommodation exceeds £75,000, the “deductible amount” means the total of amounts A and B where—

A is equal to so much of MG as does not exceed RV;
B is the amount of any excess rent paid by the employee in respect of the taxable period;
MG is the total of any sums made good, on or before 6 July following the tax year which contains the taxable period, by the employee to the person at whose cost the accommodation is provided that are properly attributable to its provision (in the taxable period);
RV is the rental value of the accommodation for the taxable period as set out in section 105(3) or (4A)(b) (as applicable).

9

In subsection (8) “excess rent” means so much of the rent in respect of the taxable period paid—

a

by the employee,

b

in respect of the accommodation,

c

to the person providing it, and

d

on or before 6 July following the tax year which contains the taxable period,

as exceeds the rental value of the accommodation.

10

Where it is necessary for the purposes of subsection (1)(b) and (3)(a) to apportion an amount of earnings to the benefit of the accommodation in the taxable period, the apportionment is to be made on a just and reasonable basis.

In this subsection “earnings” is to be interpreted in accordance with section 69B(5).

104General rule for calculating cost of providing accommodation

For any tax year the cost of providing living accommodation is given by the formula—

A + 1 - P

where—

A is any expenditure incurred in acquiring the estate or interest in the property held by a person involved in providing the accommodation,

I is any expenditure incurred on improvements to the property which has been incurred before the tax year in question by a person involved in providing the accommodation, and

P is so much of any payment or payments made by the employee to a person involved in providing the accommodation as represents—

(a) reimbursement of A or I, or
(b) consideration for the grant to the employee of a tenancy or sub-tenancy of the property.

5

If the rental value of the accommodation for the taxable period does not exceed any sum made good by the employee as mentioned in subsection (2)(b), the cash equivalent is nil.

105AF262Lease premiums

1

For the purposes of section 105(4B)(b) an amount is attributed to the relevant period “in respect of a lease premium” if—

a

the property consists of premises, or a part of premises, that are subject to a lease,

b

the premises are not mainly used by P for a purpose other than the provision of living accommodation to which this Chapter applies,

c

the lease is for a term of 10 years or less, and

d

the net amount payable by P in relation to the lease by way of lease premium is greater than zero.

2

The amount so attributed is—

where—

A is the relevant period (in days),

B is the term of the lease (in days), and

C is the net amount payable by P in relation to the lease by way of lease premium.

3

For provision about the application of this section in relation to certain leases with break clauses, see section 105B.

4

For the purposes of this section the net amount payable by P in relation to a lease by way of lease premium is—

a

the total amount (if any) that has been paid, or is or will become payable, by P in relation to the lease by way of lease premium, less

b

any amount within paragraph (a) that has been repaid or is or will become repayable.

5

In this section and section 105B “lease premium” means any premium payable—

a

under a lease, or

b

otherwise under the terms on which a lease is granted.

6

In the application of this section to Scotland “premium” includes a grassum.

105BLease premiums in the case of leases with break clauses

1

This section applies to a lease (“the original lease”) that contains one or more relevant break clauses.

2

For the purposes of this section—

a

“break clause” means a provision of a lease that gives a person a right to terminate it so that its term is shorter than it otherwise would be, and

b

a break clause contained in the original lease is “relevant” if the right to terminate the lease that it confers is capable of being exercised in such a way that the term of the original lease is 10 years or less.

3

For the purposes of section 105A—

a

the term of the original lease, and

b

b

any part of that amount that has already been attributed to a period in respect of a lease premium under section 105(4B)(b).

7

a

the net amount that would be payable by P in relation to the original lease by way of lease premium, on the assumption that no break clause is exercised, less

b

any part of that amount that has already been attributed to a period in respect of a lease premium under section 105(4B)(b).

8

In subsection (7) “the relevant proportion” means—

where—

D is the term of the notional lease (in days), and

E is the sum of—

(a) the term of the notional lease (in days), and
(b) the number of days by which the term of the original lease would exceed 10 years, on the assumption that no break clause is exercised.

Accommodation costing more than £75,000

106Cash equivalent: cost of accommodation over £75,000

1

The cash equivalent F43or modified cash equivalent is calculated under this section if the cost of providing the living accommodation exceeds £75,000.

2

To calculate the cash equivalent—

Step 1

Calculate the amount that would be the cash equivalent if section 105 applied (cash equivalent: cost of accommodation not over £75,000).

Step 2

Calculate the following amount (“the additional yearly rent”)—

ORI \times (C - £75,000)

where—

ORI is the official rate of interest in force for the purposes of Chapter 7 of this Part (taxable benefits: loans) on 6th April in the tax year, and

C is the cost of providing the accommodation calculated—

(a) in accordance with section 104 (general rule for calculating cost of accommodation), or
(b) in a case where section 107 applies (special rule for calculating cost of providing accommodation), in accordance with that section instead.

Step 3

on or before 6 July following the tax year which contains the taxable period,

exceeds the rental value of the accommodation for that period as set out in section 105(3) or (4)(b), as applicable, and

b

“the excess rent” means the total amount of that excess.

107Special rule for calculating cost of providing accommodation

1

This section contains a special rule for calculating the cost of providing living accommodation which—

a

operates for the purposes of step 2 of section 106(2) (calculating the additional yearly rent), and

b

accordingly only operates where the cost of provision for the purposes of section 106(1) (as calculated under section 104) exceeds £75,000.

2

This section applies if, throughout the period of 6 years ending with the date when the employee first occupied the accommodation (“the initial date”), an estate or interest in the property was held by a person involved in providing the accommodation.

It does not matter whether it was the same estate, interest or person throughout.

3

For any tax year the cost of providing the living accommodation for the purposes mentioned in subsection (1)(a) is given by the formula—

MV + I - P

where—

MV is the price which the property might reasonably be expected to have fetched on a sale in the open market with vacant possession as at the initial date,

I is any expenditure incurred on improvements to the property which has been incurred during the period—

(a) beginning with the initial date, and
(b) ending with the day before the beginning of the tax year,

by a person involved in providing the accommodation, and

P is so much of any payment or payments made by the employee to a person involved in providing the accommodation as represents—

(a) reimbursement (up to an amount not exceeding MV) of any expenditure incurred in acquiring the estate or interest in the property held on the initial date,
(b) reimbursement of I, or
(c) consideration for the grant to the employee of a tenancy or sub-tenancy of the property.

4

In estimating MV no reduction is to be made for an option in respect of the property held by—

a

the employee,

b

a person connected with the employee, or

c

a person involved in providing the accommodation.

Apportionment of cash equivalent

108Cash equivalent: accommodation provided for more than one employee

1

If, for the whole or part of a tax year, the same living accommodation is provided for more than one employee at the same time, the total of the cash equivalents for all of the employees is to be limited to the amount that would be the cash equivalent if the accommodation was provided for one employee.

2

The cash equivalent for each of the employees is to be such part of that amount as is just and reasonable.

Other tax implications

109Priority of this Chapter over Chapter 1 of this Part

the rent to be established under subsection (1) in respect of the accommodation is to be increased under subsection (4).

4

That rent is to include—

a

where the services are relevant services, so much of the additional amounts as exceeds the cost to the landlord of providing the services;

b

where the services are within subsection (3)(a)(ii), the whole of the additional amounts.

5

In this section “relevant service” means a service other than the repair, insurance or maintenance of the accommodation or of any other premises.

111Disputes as to annual value

1

This section applies if there is a dispute as to the amount of the annual value of living accommodation for the purposes of this Chapter.

F662

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F843

An application for the tribunal to determine the question is to be subject to the relevant provisions of Part 5 of TMA 1970 (see, in particular, section 48(2)(b) of that Act), and each of the persons concerned is entitled to be a party to the proceedings on the application.

112Meaning of “person involved in providing the accommodation”

For the purposes of this Chapter “person involved in providing the accommodation” means any of the following—

a

the person providing the accommodation;

b

the employee’s employer (if not within paragraph (a));

c

any person, other than the employee, who is connected with a person within paragraph (a) or (b).

113Meaning of “the property”

For the purposes of this Chapter “the property”, in relation to living accommodation, means the property consisting of that accommodation.

C8 C5Chapter 6Taxable benefits: cars, vans and related benefits

Annotations:

Modifications etc. (not altering text)

Pt. 3 Ch. 6 modified (6.4.2020 for the tax year 2020-21) by Finance Act 2020 (c. 14), s. 9

Pt. 3 Ch. 6 modified (6.4.2021 for the tax year 2021-22) by Finance Act 2020 (c. 14), s. 10

General

114Cars, vans and related benefits

1

This Chapter applies to a car or a van in relation to a particular tax year if in that year the car or van—

a

is made available (without any transfer of the property in it) to an employee or a member of the employee’s family or household,

b

is so made available by reason of the employment (see section 117), and

c

is available for the employee’s or member’s private use (see section 118).

F2661A

Where this Chapter applies to a car or van, the car or van is a benefit for the purposes of this Chapter (and accordingly it is immaterial whether the terms on which it is made available to the employee or member constitute a fair bargain).

2

Where this Chapter applies to a car or van—

a

sections 120 to 148 provide for F186an amount in respect of the benefit of the car to be treated as earnings,

b

sections 149 to 153 provide for F124an amount in respect of the benefit of any fuel provided for the car to be treated as earnings, F293...

c

sections 154 to F153159 provide for F5an amount in respect of the benefit of the van to be treated as earningsF93; and

d

sections 160 to 164 provide for F180an amount in respect of the benefit of any fuel provided for the van to be treated as earnings in certain circumstances.

F1003

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F2143A

This Chapter does not apply to a van in relation to a tax year if the private use of the van during the tax year by the employee or member of the employee’s family or household is insignificant.

4

The following provisions of this Chapter provide for further exceptions—

section 167 (pooled cars);
section 168 (pooled vans);
section 169 (car available to more than one member of family or household employed by same employer).
F151section 169A (van available to more than one member of family or household employed by same employer).

115Meaning of “car” and “van”

1

In this Chapter—

“car” means a mechanically propelled road vehicle which is not—
1. a
  a goods vehicle,
2. b
  a motor cycle,
3. c
  an invalid carriage, or
4. d
  a vehicle of a type not commonly used as a private vehicle and unsuitable to be so used;
“van” means a mechanically propelled road vehicle which—
1. a
  is a goods vehicle, and
2. b
  has a design weight not exceeding 3,500 kilograms,
and which is not a motor cycle.

2

For the purposes of subsection (1)—

“design weight” means the weight which a vehicle is designed or adapted not to exceed when in normal use and travelling on a road laden;
“goods vehicle” means a vehicle of a construction primarily suited for the conveyance of goods or burden of any description;
“invalid carriage” has the meaning given by section 185(1) of the Road Traffic Act 1988 (c. 52);
“motor cycle” has the meaning given by section 185(1) of the Road Traffic Act 1988.

116Meaning of when car or van is available to employee

1

For the purposes of this Chapter a car or van is available to an employee at a particular time if it is then made available, by reason of the employment and without any transfer of the property in it, to the employee or a member of the employee’s family or household.

2

References in this Chapter to—

a

the time when a car F132or van is first made available to an employee are to the earliest time when the car F132or van is made available as mentioned in subsection (1), and

b

the last day in a year on which a car F132or van is available to an employee are to the last day in the year on which the car F132or van is made available as mentioned in subsection (1).

3

This section does not apply to section F144124A or 138 (automatic car F132or van for a disabled employee).

F323117Meaning of car or van made available by reason of employment

1

For the purposes of this Chapter a car or van made available by an employer to an employee or member of an employee's family or household is to be regarded as made available by reason of the employment unless subsection (2) or (3) excludes the application of this subsection.

2

Subsection (1) does not apply where—

a

the employer is an individual, and

b

2

The mere fact that the alternative is offered does not result in an amount in respect of the benefit constituting earnings by virtue of Chapter 1 of this Part (earnings).

Cars: benefit treated as earnings

120Benefit of car treated as earnings

1

If this Chapter applies to a car in relation to a particular tax year, the cash equivalent of the benefit of the car is to be treated as earnings from the employment for that year.

2

In such a case F336(including a case where the cash equivalent of the benefit of the car is nil) the employee is referred to in this Chapter as being chargeable to tax in respect of the car in that year.

F463

Any reference in this Act to a case where the cash equivalent of the benefit of a car is treated as the employee's earnings for a year by virtue of this section includes a case where the cash equivalent is nil.

F1544

This section is subject to section 120A.

is connected with the car,

ii

is provided in that year for the employee, or a member of the employee's household, pursuant to optional remuneration arrangements, and

iii

is neither the provision of a driver nor the provision of fuel.

121Method of calculating the cash equivalent of the benefit of a car

1

The cash equivalent of the benefit of a car for a tax year is calculated as follows—

Step 1

Find the price of the car in accordance with sections 122 to F313124A.

Step 2

Add the price of any accessories which fall to be taken into account in accordance with sections 125 to 131.

Step 3

Make any deduction under section 132 for capital contributions made by the employee to the cost of the car or accessories. F338The resulting amount is the interim sum.

Step 4

F134...

Step 5

Find the appropriate percentage for the car for the year in accordance with sections 133 to 142.

Step 6

Multiply the interim sum by the appropriate percentage for the car for the year.

Step 7

Make any deduction under section 143 for any periods when the car was unavailable.

The resulting amount is the provisional sum.

Step 8

Make any deduction from the provisional sum under section 144 in respect of payments by the employee for the private use of the car.

The result is the cash equivalent of the benefit of the car for the year.

2

The method of calculation set out in subsection (1) is modified in the special cases dealt with in—

section 146 (cars that run on road fuel gas), and
section 147 (classic cars: 15 years of age or more).

F443

Where the car is shared the cash equivalent is calculated under this section in accordance with section 148.

121AF211Optional remuneration arrangements: method of calculating relevant amount

1

To find the relevant amount for the purposes of section 120A, take the following steps—

F302Step 1 Take the total foregone amount in connection with the car for the tax year (see section 120A(4)). .
Step 2 Make any deduction under section 132A in respect of capital contributions made by the employee to the cost of the car or accessories.
The resulting amount is the provisional sum.
Step 3 Make any deduction from the provisional sum under section 144 in respect of payments by the employee for the private use of the car.
The result is the “relevant amount” for the purposes of section 120A.

2

Where it is necessary, for the purpose of determining the F52“total foregone amount” for the purposes of step 1 of subsection (1), to apportion an amount of earnings to F97a benefit mentioned in section 120A(4)(a) or (b) for the tax year, the apportionment is to be made on a just and reasonable basis.

In this subsection “earnings” is to be interpreted in accordance with section 69B(5).

121BMeaning of “modified cash equivalent”

1

The “modified cash equivalent” of the benefit of a car for a tax year is calculated in accordance with the following steps (which must be read with subsections (2) to (4))—

Step 1 Find the price of the car in accordance with sections 122 to 124A.
Step 2 Add the price of any accessories which fall to be taken into account in accordance with sections 125 to 131.
The resulting amount is the interim sum.
Step 3 Find the appropriate percentage for the car for the year in accordance with sections 133 to 142.
Step 4 Multiply the interim sum by the appropriate percentage for the car for the year.
Step 5 Make any deduction under section 143 for any periods when the car was unavailable.
The resulting amount is the modified cash equivalent of the benefit of the car for the year.

2

Where the car is shared the modified cash equivalent is calculated under this section in accordance with section 148.

3

The modified cash equivalent of the benefit of a car for a tax year is to be taken to be zero if the condition in subsection (4) is met.

4

The condition is that the benefit of the car for the tax year would be exempt from income tax but for section 228A (exclusion of certain exemptions).

5

The method of calculation set out in subsection (1) is modified in the special cases dealt with in—

a

section 146 (cars that run on road fuel gas), and

b

section 147A (classic cars: optional remuneration arrangements).

Cars: the price of a car

122The price of the car

F2071

For the purposes of this Chapter the price of a car means—

This is subject to section 124A (automatic car for a disabled employee).

a

its list price, if it has one, or

b

its notional price, if it has no list price.

F2902

This is subject to section 124A (automatic car for a disabled employee).

C12123The list price of a car

1

In this Chapter a car’s “list price” means the price published by the car’s manufacturer, importer or distributor (as the case may be) as the inclusive price appropriate for a car of that kind if sold—

a

in the United Kingdom,

b

singly,

c

in a retail sale,

d

in the open market, and

e

on the day immediately before the date of the car’s first registration.

2

The “inclusive price” means the price inclusive of—

a

any charge for delivery by the manufacturer, importer or distributor to the seller’s place of business, and

b

any relevant taxes (see section 171(1)).

C10124The notional price of a car with no list price

1

In this Chapter a car’s “notional price” means the price which might reasonably have been expected to be its list price if its manufacturer, importer or distributor (as the case may be) had published a price as the inclusive price appropriate for a sale of a car of the same kind sold—

a

in the United Kingdom,

b

singly,

c

in a retail sale,

d

in the open market,

e

on the day immediately before the date of the car’s first registration, and

f

with accessories equivalent to the qualifying accessories (see section 125) available with the car at the time when it was first made available to the employee.

2

In this section “inclusive price” has the same meaning as in section 123.

any modification to the car's fuel tank designed to protect the tank's contents from explosions or gunfire (including by making the tank self-sealing), and

d

any modification made to the car in consequence of anything which is a relevant security feature by virtue of paragraph (a), (b) or (c).

4

The Treasury may by regulations amend the definition of “relevant security feature” in subsection (3).

its notional price, if it has no list price.

5

This section is subject to section 131 (replacement accessories).

C4127The list price of an accessory

1

For the purposes of this Chapter the list price of an initial extra accessory is—

a

the published price of the manufacturer, importer or distributor of the car (see section 128), or

b

if there is no such price, the published price of the manufacturer, importer or distributor of the accessory (see section 129).

2

For the purposes of this Chapter the list price of a later accessory is the published price of the manufacturer, importer or distributor of the accessory (see section 129).

C4128Accessory: published price of the car manufacturer etc.

1

In this Chapter the “published price of the manufacturer, importer or distributor of the car” in relation to an accessory means the price published by the car’s manufacturer, importer or distributor (as the case may be) as the inclusive price appropriate for an equivalent accessory if sold with a car of the same kind—

a

in the United Kingdom,

b

singly,

c

in a retail sale,

d

in the open market, and

e

on the day immediately before the date of the car’s first registration.

2

The “inclusive price” means the price inclusive of—

a

any charge for delivery by the manufacturer, importer or distributor to the seller’s place of business,

b

any relevant taxes other than car tax (see section 171(1)), and

c

any charge for fitting the accessory.

C4129Accessory: published price of the accessory manufacturer etc.

1

In this Chapter the “published price of the manufacturer, importer or distributor of the accessory” in relation to an accessory means the price published by or on behalf of the manufacturer, importer or distributor of the accessory (as the case may be) as the inclusive price appropriate for such an accessory if sold—

a

in the United Kingdom,

b

singly,

c

in a retail sale,

d

in the open market, and

e

at the time immediately before the accessory concerned is first made available for use with the car.

2

The “inclusive price” means the price inclusive of—

a

any charge for delivery by the manufacturer, importer or distributor to the seller’s place of business,

b

any relevant taxes other than car tax (see section 171(1)), and

c

in the case of an accessory permanently attached to the car, the price which the seller would charge for attaching it.

3

In the case of an initial extra accessory, the time referred to in subsection (1)(e) may be a time before the car is first made available to the employee.

C4130The notional price of an accessory

1

In this Chapter the “notional price” of an accessory means the inclusive price which it might reasonably have been expected to fetch if sold—

a

in the United Kingdom,

b

singly,

c

in a retail sale,

d

in the open market, and

e

at the time immediately before the accessory concerned is first made available for use with the car.

2

The “inclusive price” means the price inclusive of—

a

any charge for delivery by the manufacturer, importer or distributor to the seller’s place of business,

b

any relevant taxes other than car tax (see section 171(1)), and

c

in the case of an accessory permanently attached to the car, the price which the seller would charge for attaching it.

3

In the case of an initial extra accessory, the time referred to in subsection (1)(e) may be a time before the car is first made available to the employee.

In subsection (3) the reference to “the appropriate percentage” is to the appropriate percentage for the car for the tax year (determined in accordance with sections 133 to 142).

F174A

For the purposes of subsection (3), “the availability factor” is given by the formula—

where—

Y is the number of days in the tax year, and

is a car without a CO₂ emissions figure (see section 134(2)), F252...

F252c

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

and is determined under sections 139 F254and 140.

3

If the car was first registered before 1st January 1998, the “appropriate percentage” is determined under section 142.

C2134Meaning of car with or without a CO₂ emissions figure

1

In this Chapter a “car with a CO₂ emissions figure” means—

a

a car first registered on or after 1st January 1998 but before 1st October 1999 to which section 135 applies,

b

a car first registered on or after 1st October 1999 F87but before IP completion day to which section 136 F291(registration from 1st October 1999 to IP completion day) applies, F56...

F221ba

a car first registered on or after IP completion day to which section 136A (registration on or after IP completion day) applies,

c

a car first registered on or after 1st January 2000 F90but before IP completion day which is a car to which section 137 (bi-fuel cars F294: registration from 1st January 2000 to IP completion day) applies F146, or

d

a car first registered on or after IP completion day to which section 137A (bi-fuel cars: registration on or after IP completion day) applies.

2

In this Chapter a “car without a CO₂ emissions figure” means any other car first registered on or after 1st January 1998.

Cars: appropriate percentage: first registered on or after 1st January 1998

C2135Car with a CO₂ emissions figure: pre-October 1999 registration

1

This section applies to a car first registered on or after 1st January 1998 but before 1st October 1999 if when it was so registered—

a

it conformed to a vehicle type with an EC type-approval certificate (see section 171(1)), or

b

it had a UK approval certificate (see section 171(1)),

which specifies a CO₂ emissions figure in terms of grams per kilometre driven.

2

The car’s CO₂ emissions figure is that specified figure.

3

This is subject to section 138 (automatic car for a disabled employee).

C2136C8Car with a CO₂ emissions figure: F216registration from 1st October 1999 to IP completion day

the lowest figure specified, or

b

if there is more than one figure specified in relation to each fuel, the lowest CO₂ emissions (combined) figure specified.

F2972A

For the purpose of determining the car's CO₂ emissions figure F77in a case where the car is first registered before 6 April 2020, ignore any WLTP (worldwide harmonised F258light vehicles test procedures) values specified in F242the EC certificate of conformity or UK approval certificate.

F332B

3

F156Subsection (2) is subject to section 138 (automatic car for a disabled employee).

137AF303Car with a CO₂ emissions figure: bi-fuel cars registered on or after IP completion day

1

This section applies to a car first registered on or after IP completion day if it is so registered on the basis of a qualifying emissions certificate which specifies separate CO₂ emissions figures in terms of grams per kilometre driven for different fuels.

2

The car’s CO₂ emissions figure is—

a

the lowest figure specified, or

b

if there is more than one figure specified in relation to each fuel, the lowest CO₂ emissions (combined) figure specified.

3

4

Subsection (2) is subject to section 138 (automatic car for a disabled employee).

a clutch pedal, or

ii

a lever which the driver may operate manually.

5 C2139F268Cars with a CO₂ emissions figure: the appropriate percentage

1

F319The appropriate percentage for a year for a car with a CO₂ emissions figure of less than 75 is determined in accordance with the following table.

Car	Appropriate percentage
Car with CO₂ emissions figure of 0	2%
Car with CO₂ emissions figure of 1 - 50
Car with electric range figure of 130 or more	2%
Car with electric range figure of 70 - 129	5%
Car with electric range figure of 40 - 69	8%
Car with electric range figure of 30 - 39	12%
Car with electric range figure of less than 30	14%
Car with CO₂ emissions figure of 51 - 54	15%
Car with CO₂ emissions figure of 55 - 59	16%
Car with CO₂ emissions figure of 60 - 64	17%
Car with CO₂ emissions figure of 65 - 69	18%
Car with CO₂ emissions figure of 70 - 74	19%

F992

For the purposes of subsection (1) and the table—

a

if a CO₂ emissions figure is not a whole number, round it down to the nearest whole number, and

b

if an electric range figure is not a whole number, round it up to the nearest whole number.

3

The appropriate percentage for a year for a car with a CO₂ emissions figure of 75 or more is whichever is the lesser of—

a

20% plus one percentage point for each 5 grams per kilometre driven by which the CO₂ emissions figure exceeds 75, and

b

37%.

4

For the purposes of subsection (3), if a CO₂ emissions figure is not a multiple of 5, round it down to the nearest multiple of 5.

5

In this section, an “electric range figure” is the number of miles which is the equivalent of the number of kilometres specified in an EC certificate of conformity, an EC type-approval certificate or a UK approval certificate on the basis of which a car is registered, as being the maximum distance for which the car can be driven in electric mode without recharging the battery.

F1405A

For the purpose of determining the electric range figure for a car first registered before 6 April 2020, ignore any WLTP (worldwide harmonised light vehicle test procedures) values specified in an EC certificate of conformity, an EC type-approval certificate or a UK approval certificate.

5B

For the purpose of determining the electric range figure for a car first registered on or after 6 April 2020, ignore any values specified in an EC certificate of conformity, an EC type-approval certificate or a UK approval certificate that are not WLTP (worldwide harmonised light vehicle test procedures) values.

7

This section is subject to—

F213a

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

b

any regulations made by the Treasury under section 170(4) (power to reduce the appropriate percentage).

C2140Car without a CO₂ emissions figure: the appropriate percentage

1

The appropriate percentage for a year for a car without a CO₂ emissions figure is determined under this section.

2

If the car has an internal combustion engine with one or more reciprocating pistons, the appropriate percentage for the year is—

Table

Cylinder capacity of car in cubic centimetres	Appropriate percentage
1,400 or less	F5024%
More than 1,400 but not more than 2,000	F10635%
More than 2,000	F19837%

For this purpose a car’s cylinder capacity is the capacity of its engine as calculated for the purposes of VERA 1994.

3

If subsection (2) does not apply, the appropriate percentage for the year is—

F188F96a

~~F305F329%F218F30513%F12F21816%~~F122% if the car cannot in any circumstances emit CO2 by being driven, and

b

F27237% in any other case.

F3093A

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F3114

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5

This section is subject to—

F219a

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

b

any regulations made by the Treasury under section 170(4) (power to reduce the appropriate percentage).

F133 C2141Diesel cars: the appropriate percentage

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Cars: appropriate percentage: first registered before 1st January 1998

C2142Car first registered before 1st January 1998: the appropriate percentage

1

The appropriate percentage for a car first registered before 1st January 1998 is determined under this section.

2

If the car has an internal combustion engine with one or more reciprocating pistons, the appropriate percentage for the year is—

Table

Cylinder capacity of car in cubic centimetres	Appropriate percentage
1,400 or less	F16424%
More than 1,400 but not more than 2,000	F24635%
More than 2,000	F24037%

For this purpose a car’s cylinder capacity is the capacity of its engine as calculated for the purposes of VERA 1994.

3

If subsection (2) does not apply, the appropriate percentage for the year is F13537%.

F1484

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Cars: unavailability or payments for private use

143Deduction for periods when car unavailable

F200A1

This section has effect for the purposes of—

a

section 121(1) (method of calculating the cash equivalent of the benefit of a car), and

b

section 121B(1) (optional remuneration arrangements: meaning of “modified cash equivalent”).

1

A deduction is to be made from the amount carried forward from step 6 of section 121(1) F287or (as the case may be) step 4 of section 121B(1) if the car has been unavailable on any day during the tax year in question.

2

For the purposes of this section a car is unavailable on any day if the day—

a

falls before the first day on which the car is available to the employee,

b

falls after the last day on which the car is available to the employee, or

c

falls within a period of 30 days or more throughout which the car is not available to the employee.

3

The amount of the deduction is given by the formula—

\frac{U}{Y} \times A

where—

U is the number of days in the year on which the car is unavailable,

Y is the number of days in that year, and

A is the amount carried forward from step 6 F278of section 121(1) or (as the case may be) step 4 of section 121B(1) .

4

This section is subject to section 145 (modification where car temporarily replaced).

in a case within subsection (1A)(b), the relevant amount for the purposes of section 120A.

4

In this section the reference to the car being available for the employee’s private use includes a reference to the car being available for the private use of a member of the employee’s family or household.

5

This section is subject to section 145 (modification where car temporarily replaced).

145Modification of provisions where car temporarily replaced

2

The price of the car found under step 1 of section 121(1) F275or (as the case may be) step 1 of section 121B(1) is to be reduced by so much of that price as it is reasonable to attribute to the car being manufactured in such a way as to be capable of running on road fuel gas rather than in such a way as to be capable of running only on petrol.

£5,000.

147AF82Classic cars: optional remuneration arrangements

1

This section applies in calculating the relevant amount in respect of a car for a tax year for the purposes of section 120A (benefit of car treated as earnings: optional remuneration arrangements) if—

a

the age of the car at the end of the year is 15 years or more,

b

the market value of the car for the year is £15,000 or more, and

c

that market value exceeds the specified amount (see subsection (4)).

2

In calculating the modified cash equivalent of the benefit of the car, for the interim sum calculated under step 2 of section 121B(1) substitute the market value of the car for the tax year in question.

3

Section 132A (capital contributions by employee: optional remuneration arrangements) has effect as if—

a

in subsection (1)(b) the reference to calculating under section 121B the modified cash equivalent of the benefit of the car were to determining the market value of the car, and

b

in subsection (5)(a)(ii) the reference to calculating under section 121B the modified cash equivalent of the benefit of the car for the tax year in question were to determining the market value of the car for the tax year in question.

4

The “specified amount” is found as follows.

Step 1 Find what would be the interim sum under step 2 of section 121B(1) (if subsection (2) of this section did not have effect).
Step 2 (Assuming for this purpose that the reference in section 132(2) to step 2 of section 121(1) includes a reference to step 1 of this subsection) make any deduction under section 132 for capital contributions made by the employee to the cost of the car or accessories.
The resulting amount is the specified amount.

5

The market value of a car for a tax year is to be determined in accordance with section 147(3) and (4).

Cars: reduction where shared car

148Reduction of cash equivalent where car is shared

1

This section applies F267for the purposes of sections 121 and 121B if in a tax year a car—

a

is available to more than one employee concurrently,

b

is so made available by the same employer, and

c

is available concurrently for each employee’s private use,

and two or more of those employees are chargeable to tax in respect of the car in that year by virtue of F81sections 120 and 120A .

F1132

The amount to be treated as earnings in respect of the benefit of the car is to be calculated separately for each of those employees for that tax year (whether under section 120 or section 120A).

F1222A

F39In the case of an employee chargeable to tax in respect of the car by virtue of section 120 The provisional sum calculated under step 7 in section 121(1) is to be reduced on a just and reasonable basis before making any deduction under step 8.

F792B

In the case of an employee chargeable to tax in respect of the car by virtue of section 120A, the modified cash equivalent (as determined under section 121B(1)) is to be reduced on a just and reasonable basis.

F1753

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4

In this section the reference to the car being available for each employee’s private use includes a reference to the car being available for the private use of a member of the employee’s family or household.

Car fuel: benefit treated as earnings

149Benefit of car fuel treated as earnings

1

If in a tax year—

a

fuel is provided for a car by reason of an employee’s employment, and

b

that person is chargeable to tax in respect of the car by virtue of section 120 F279or 120A,

the cash equivalent of the benefit of the fuel is to be treated as earnings from the employment for that year.

2

The cash equivalent of the benefit of the fuel is calculated in accordance with sections 150 to 153.

3

Fuel is to be treated as provided for a car, in addition to any other way in which it may be provided, if—

a

any liability in respect of the provision of fuel for the car is discharged,

b

a non-cash voucher or a credit-token is used to obtain fuel for the car,

c

a non-cash voucher or a credit-token is used to obtain money which is spent on fuel for the car, or

d

any sum is paid in respect of expenses incurred in providing fuel for the car.

4

References in this section to fuel do not include any facility or means for supplying electrical energy F162or any energy for a car which cannot in any circumstances emit CO₂ by being driven.

149AF299Benefit of car fuel treated as earnings: optional remuneration arrangements

1

i

for any part of the tax year in question, is required to make good to the person providing the fuel the whole of the expense incurred by that person in connection with the provision of the fuel for the employee’s private use F226, and

ii

the employee does make good that expense on or before 6 July following that tax year

3

The fact that any of the conditions specified in subsection (2) is met for part of a tax year is to be disregarded if there is a time later in that year when none of those conditions is met.

4

Where the cash equivalent is to be proportionately reduced under subsection (1) or (2) (or under both those subsections), the reduced amount is given by the formula—

CE \times \frac{Y - D}{Y}

where—

CE is the amount of the cash equivalent before any reduction,

Y is the number of days in the tax year in question, and

D is the total number of days in that year on which either the car is unavailable or one or more of the conditions in subsection (2) is met.

153Car fuel: reduction of cash equivalent

If a reduction of the cash equivalent of the benefit of the car for which the fuel is provided is made under section 148 (reduction of cash equivalent where car is shared), a corresponding reduction is to be made in relation to the cash equivalent of the benefit of the fuel.

Vans: benefit treated as earnings

154Benefit of van treated as earnings

1

F233If this Chapter applies to a van in relation to a particular tax year, the cash equivalent of the benefit of the van is to be treated as earnings from the employment for that year.

F1732

In such a case (including a case where the cash equivalent of the benefit of the van is nil) the employee is referred to in this Chapter as being chargeable to tax in respect of the van for that year.

3

Any reference in this Act to a case where the cash equivalent of the benefit of a van is treated as the employee's earnings for a year by virtue of this section includes a case where the cash equivalent is nil.

F3244

This section is subject to section 154A.

154AF282Benefit of van treated as earnings: optional remuneration arrangements

1

Where this Chapter applies to a van in relation to a particular tax year and the conditions in subsection (2) are met—

a

the relevant amount is to be treated as earnings from the employment for that tax year, and

b

section 154(1) does not apply.

In such a case (including a case where the relevant amount is nil) the employee is referred to in this Chapter as being chargeable to tax in respect of the van in the tax year.

2

The conditions are that—

a

the van is made available to the employee or member of the employee's household pursuant to optional remuneration arrangements, and

b

F277the total foregone amount in connection with the van is greater than the modified cash equivalent of the benefit of the van.

3

To find the relevant amount for the purposes of this section take the following steps—

F116Step 1 Take the total foregone amount in connection with the van for the tax year.
Step 2 Make any deduction under section 158A in respect of payments by the employee for the private use of the van.
The result is the “relevant amount”.

4

In subsection (2) the reference to the “modified cash equivalent” is to the amount which would be the cash equivalent of the benefit of the van (after any reductions under section 156 or 157) if this Chapter had effect the following modifications—

a

omit paragraph (c) of section 155(8);

b

omit section 158;

c

in section 159(2)(b), for “155, 157 and 158” substitute “ 155 and 157 ”.

5

For the purposes of subsection (2) assume that the modified cash equivalent of the benefit of the van is zero if the condition in subsection (6) is met.

6

The condition is that the benefit of the van would be exempt from income tax but for section 228A (exclusion of certain exemptions).

7

Where it is necessary for the purposes of subsection (2)(b) and step 1 of subsection (3) to apportion an amount of earnings to F183a benefit mentioned in subsection (8)(a) or (b) in the tax year, the apportionment is to be made on a just and reasonable basis.

In this subsection “earnings” is to be interpreted in accordance with section 69B(5).

F1158

In this section the total foregone amount in connection with the van for a tax year is the total of—

a

the amount foregone (see section 69B) with respect to the benefit of the van for that year, and

b

the amount foregone (see section 69B) with respect to each other benefit that—

i

is connected with the van,

ii

is provided in that year for the employee, or a member of the employee's household, pursuant to optional remuneration arrangements, and

iii

is neither the provision of a driver nor the provision of fuel.

b

falls after the last day on which the van is available to the employee, or

c

falls within a period of 30 days or more throughout which the van is not available to the employee.

3

The amount of the reduction is given by the formula—

where—

U is the number of days in the year on which the van is unavailable,

Y is the number of days in the year, and

If the amount paid F292as mentioned in subsection (1)(b) by the employee in respect of that year is equal to or exceeds that cash equivalent, it is reduced to nil.

3

In any other case that cash equivalent is reduced by the amount paid F342as mentioned in subsection (1)(b) by the employee.

4

In this section the reference to the van being available for the employee’s private use includes a reference to the van being available for the private use of a member of the employee’s family or household.

the cash equivalent of the van for that year is that under F86section 155(1B)(b),

the cash equivalent of the benefit of the fuel is to be treated as earnings from the employment for that year.

2

The cash equivalent of the benefit of the fuel is calculated in accordance with sections 161 to 164.

3

Fuel is to be treated as provided for a van, in addition to any other way in which it may be provided, if—

a

any liability in respect of the provision of fuel for the van is discharged,

b

a non-cash voucher or a credit-token is used to obtain fuel for the van,

c

a non-cash voucher or a credit-token is used to obtain money which is spent on fuel for the van, or

d

any sum is paid in respect of expenses incurred in providing fuel for the van.

F2504

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F1285

This section is subject to section 160A.

1

The cash equivalent of the benefit of the fuel is nil if condition A or B is met.

2

Condition A is met if F274...—

a

F19in the tax year in question, the employee is required to make good to the person providing the fuel the whole of the expense incurred by that person in connection with the provision of the fuel for the employee’s private use, and

b

the employee does make good that expense F15on or before 6 July following that tax year .

3

Condition B is met if in the tax year in question the fuel is made available only for business travel (see section 171(1)).

F312163Van fuel: proportionate reduction of cash equivalent

1

The cash equivalent of the benefit of the fuel is to be proportionately reduced if for any part of the tax year in question the van for which the fuel is provided is unavailable (within the meaning of section 156 (reduction for periods when van unavailable)).

2

But if section 159 (van temporarily replaced) applies—

a

section 160 applies as if the replacement van were the normal van, and

b

for the purposes of subsection (1) the replacement van is to be treated as unavailable on the days during the period on which it replaces the normal van.

3

The cash equivalent of the benefit of the fuel is also to be proportionately reduced if F129...—

a

F239for any part of the tax year in question, the facility for the provision of fuel as mentioned in section 160 (1) is not available,

b

F235for any part of the tax year in question, the fuel is made available only for business travel (see section 171(1)), or

c

the employeeF199—

i

for any part of the tax year in question,is required to make good to the person providing the fuel the whole of the expense incurred by that person in connection with the provision of the fuel for the employee’s private useF22, and

ii

the employee does make good that expense on or before 6 July following that tax year

4

The fact that any of the conditions specified in subsection (3) is met for part of a tax year is to be disregarded if there is a time later in that year when none of those conditions is met.

5

Where the cash equivalent is to be proportionately reduced under subsection (1) or (3) (or under both those subsections), the reduced amount is given by the formula—

where—

CE is the amount of the cash equivalent before any reduction,

Y is the number of days in the tax year in question, and

D is the total number of days in the tax year on which either the van is unavailable or one or more of the conditions in subsection (3) is met.

F312164Van fuel: reduction of cash equivalent

If a reduction of the cash equivalent of the benefit of the van for which the fuel is provided is made under section 157 (reduction of cash equivalent where van is shared), a corresponding reduction is to be made in relation to the cash equivalent of the benefit of the fuel.

Cars and vans: exceptions

167Pooled cars

1

This section applies to a car in relation to a particular tax year if for that year the car has been included in a car pool for the use of the employees of one or more employers.

2

For that tax year the car—

a

is to be treated under section 114(1) (cars to which this Chapter applies) as not having been available for the private use of any of the employees concerned, and

b

is not to be treated in relation to the employees concerned as an employment-related benefit within the meaning of Chapter 10 of this Part (taxable benefits: residual liability to charge) (see section 201).

3

In relation to a particular tax year, a car is included in a car pool for the use of the employees of one or more employers if in that year—

a

the car was made available to, and actually used by, more than one of those employees,

b

the car was made available, in the case of each of those employees, by reason of the employee’s employment,

c

the car was not ordinarily used by one of those employees to the exclusion of the others,

d

in the case of each of those employees, any private use of the car made by the employee was merely incidental to the employee’s other use of the car in that year, and

e

the car was not normally kept overnight on or in the vicinity of any residential premises where any of the employees was residing, except while being kept overnight on premises occupied by the person making the car available to them.

168Pooled vans

1

This section applies to a van in relation to a particular tax year if for that year the van has been included in a van pool for the use of the employees of one or more employers.

2

For that tax year the van—

a

is to be treated under section 114(1) (vans to which this Chapter applies) as not having been available for the private use of any of the employees concerned, and

b

3

In relation to a particular tax year, a van is included in a van pool for the use of the employees of one or more employers if in that year—

a

the van was made available to, and actually used by, more than one of those employees,

b

the van was made available, in the case of each of those employees, by reason of the employee’s employment,

c

the van was not ordinarily used by one of those employees to the exclusion of the others,

d

in the case of each of those employees, any private use of the van made by the employee was merely incidental to the employee’s other use of the van in that year, and

e

the van was not normally kept overnight on or in the vicinity of any residential premises where any of the employees was residing, except while being kept overnight on premises occupied by the person making the van available to them.

169Car available to more than one member of family or household employed by same employer

1

This section applies where—

a

an employee (“E”) and a member of the employee’s family or household (“M”) are employed by the same employer, and

b

as a result of a car being made available to M in a tax year, E would (apart from this section) be chargeable to tax in respect of the car in that year by virtue of section 120.

2

The cash equivalent of the benefit of the car and of any fuel provided for the car by reason of E’s employment is not to be treated as E’s earnings for that year if—

a

M is chargeable to tax in respect of the car in that year by virtue of section 120, or

F232b

M's employment is lower-paid employment as a minister of religion.

F343

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F344

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

169AF142Van available to more than one member of family or household employed by same employer

c

subject to such conditions,

as may be prescribed in the regulations.

5

The Treasury may by order substitute a different amount for that specified in section 150(1) (car fuel: cash equivalent) F105or section 161(b) (van fuel: cash equivalent).

6

An order under subsection (5) must specify the tax years to which it applies, being tax years beginning after that in which it is made.

Supplementary

171Minor definitions: general

1

In this Chapter—

“business travel”, in relation to any employee, means travelling the expenses of which, if incurred and paid by the employee, would (if Chapter 2 of Part 4 did not apply) be deductible under sections 337 to 342, section 353 or under Chapter 5 of Part 5 (other than section 377);
“diesel” means any diesel fuel within the definition in Article 2 of Directive 98/70/EC of the European Parliament and of the Council;
F69“EC certificate of conformity” means a certificate of conformity within the meaning of—
1. a
  Council Directive 70/156/EEC,
2. b
  Directive 2007/46/EC of the European Parliament and of the Council of 5 September 2007, or
3. c
  Regulation (EU) 2018/858 of the European Parliament and of the Council of 30 May 2018 on the approval and market surveillance of motor vehicles and their trailers, and of systems, components and separate technical units intended for such vehicles;
F185“EC type-approval certificate” means—
1. a
  a type-approval certificate issued under any provision of the law of a Member State implementing Council Directive 70/156/EEC,
2. b
  an EC type-approval certificate within the meaning of Council Directive 2007/46/EC, or
3. c
  an EU type-approval certificate within the meaning of Regulation (EU) 2018/858 of the European Parliament and of the Council of 30 May 2018 on the approval and market surveillance of motor vehicles and their trailers, and of systems, components and separate technical units intended for such vehicles;
F245“qualifying emissions certificate” has the same meaning as in CAA 2001 (see section 268C(1) of that Act);
“relevant taxes” means any car tax, any value added tax, any customs or excise duty and any tax chargeable as if it were a customs duty;
“road fuel gas” means any substance which is gaseous at a temperature of 15°C and under a pressure of 1013.25 millibars, and which is for use as fuel in road vehicles;
F249“UK approval certificate” means—
1. a
  a certificate issued under—
  1. i
    section 58(1) or (4) of the Road Traffic Act 1988, or
  2. ii
    Article 31A(4) or (5) of the Road Traffic (Northern Ireland) Order 1981 (S.I. 1981/154 (N.I. 1)), or
2. b
  any other certificate or document issued in the United Kingdom on the basis of which a vehicle is first registered, other than an EC certificate of conformity or an EC type-approval certificate.

2

In this Chapter references to the date of first registration in relation to a car F251... are to the date on which the vehicle was first registered under VERA 1994 or under corresponding legislation of any country or territory.

3

In this Chapter references to the age of a car F55... at any time are to the interval between the date of first registration of the vehicle and that time.

4

In this Chapter “disabled person’s badge” means a badge—

a

which is issued to a disabled person under section 21 of the Chronically Sick and Disabled Persons Act 1970 (c. 44) or section 14 of the Chronically Sick and Disabled Persons (Northern Ireland) Act 1978 (c. 53), or has effect as if it had been issued under one of those provisions, and

b

which is not required to be returned to the issuing authority under or by virtue of the provision referred to in paragraph (a).

172Minor definitions: equipment to enable a disabled person to use a car

1

In section 125(2)(c) “equipment to enable a disabled person to use a car” means equipment—

a

which is designed solely for use by a chronically sick or disabled person, or

b

which is made available for use with the car because it enables a disabled employee to use the car in spite of the disability.

2

In this section—

“disabled employee” means an employee who, at the time when the car is first made available to the employee, holds a disabled person’s badge, and
“the disability” means the disability entitling the disabled employee to hold the disabled person’s badge.

C6Chapter 7Taxable benefits: loans

Annotations:

Modifications etc. (not altering text)

Pt. 3 Ch. 7 extended (with modifications) (with effect in accordance with s. 97(3) of the amending Act) by Finance Act 2006 (c. 25), s. 97(1)(2)

Introduction

173Loans to which this Chapter applies

1

This Chapter applies to a loan if it is an employment-related loan.

F3141A

Where this Chapter applies to a loan—

a

the loan is a benefit for the purposes of this Chapter (and accordingly it is immaterial whether the terms of the loan constitute a fair bargain), and

b

sections 175 to 183 F286make provision about amounts which, in the case of a taxable cheap loan, are to be treated as earnings in certain circumstances .

2

In this Chapter—

a

“loan” includes any form of credit, and

b

references to making a loan (and related expressions) include arranging, guaranteeing or in any way facilitating a loan.

3

Sections 288 and 289 make provision for exemption and relief for certain bridging loans connected with employment moves.

173AF31Alternative finance arrangements

1

For the purposes of this Chapter a reference to a loan includes a reference to arrangements—

a

to which section 564C of ITA 2007 or section 503 of CTA 2009 (purchase and resale arrangements) applies (or would apply assuming one of the parties were a financial institution), or

b

to which section 564D of ITA 2007 or section 504 of CTA 2009 (diminishing shared ownership arrangements) applies (or would apply on that assumption).

2

In the application of this Chapter as a result of this section, a reference to interest is to be treated as including alternative finance return (or anything that would be such return on that assumption).

3

In the application of this Chapter as a result of this section, a reference to the amount outstanding is to be taken—

a

in the case of arrangements within subsection (1)(a), as a reference to the purchase price minus such part of the aggregate payments made as does not represent alternative finance return (or anything that would be such return on that assumption),

b

in the case of arrangements to which section 564D of ITA 2007 or section 504 of CTA 2009 applies, as a reference to the amount of the F35first owner’s original beneficial interest minus such part of the aggregate payments made as does not represent alternative finance return, and

c

in the case of arrangements to which section 564D of ITA 2007 or section 504 of CTA 2009 would apply assuming one of the parties were a F320first owner, as a reference to the amount of that party's original beneficial interest minus such part of the aggregate payments made as does not represent anything that would be alternative finance return on that assumption.

4

In this section—

“alternative finance return” has the meaning given in sections 564I to 564L of ITA 2007 or sections 511 to 513 of CTA 2009, F177...
“financial institution” has the meaning given in section 564B of ITA 2007 or section 502 of CTA 2009F6, and
“first owner” is to be construed in accordance with section 564D of ITA 2007 or section 504 of CTA 2009.

5

This section does not apply to arrangements entered into before 22 March 2006.

174Employment-related loans

1

For the purposes of this Chapter an employment-related loan is a loan—

a

made to an employee or a relative of an employee, and

b

of a class described in subsection (2).

2

For the purposes of this Chapter the classes of employment-related loan are—

A loan made by the employee’s employer.

A loan made by a company or partnership over which the employee’s employer had control.

A loan made by a company or partnership by which the employer (being a company or partnership) was controlled.

A loan made by a company or partnership which was controlled by a person by whom the employer (being a company or partnership) was controlled.

A loan made by a person having a material interest in—

a

a close company which was the employer, had control over the employer or was controlled by the employer, or

b

a company or partnership controlling that close company.

3

In this section—

“employee” includes a prospective employee, and
“employer” includes a prospective employer.

179Exception for certain advances for necessary expenses

1

An advance by an employer to an employee for the purpose of paying for—

a

necessary expenses, or

b

7

In subsection (6)(b) “the overnight stay conditions” has the same meaning as in section 240 (exemption for incidental overnight expenses) (see section 240(4)).

180Threshold for benefit of loan to be treated as earnings

b

the employee normally lives in that country or territory, and has actually lived there at some time in the period of 6 years ending with the tax year in question.

3

Subsection (2) does not affect the general power under section 178(3) of FA 1989 to make different provision for different purposes.

182Normal method of calculation: averaging

The normal method of calculating for the purposes of this Chapter the amount of interest that would be payable on a loan for a tax year at the official rate is as follows. Step 1

Calculate the average amount of the loan outstanding during the tax year—

1. Find the maximum amount of the loan outstanding on 5th April preceding the tax year or, if the loan was made in the tax year, on the date it was made.

2. Find the maximum amount outstanding on 5th April of the tax year or, if the loan was discharged in the tax year, on the date of discharge.

3. Add these amounts together and divide the result by 2.

Step 2

If the official rate of interest changed during the period in the tax year when the loan was outstanding, calculate the average official rate of interest for that period as follows—

1. Multiply each official rate of interest in force during the period by the number of days when it is in force.

2. Add these products together.

3. Divide the result by the number of days in the period.

Step 3

Calculate the amount of interest that would be payable on the loan for the tax year at the official rate as follows—

A \times I \times \frac{M}{12}

where—

A is the average amount of the loan outstanding during the tax year obtained from step 1,

I is the official rate of interest in force during the period in the tax year when the loan was outstanding or, if the official rate changed, the average official rate of interest obtained from step 2, and

M is the number of whole months during which the loan was outstanding in the year.

For this purpose a month begins on the sixth day of the calendar month.

183Alternative method of calculation

1

The alternative method of calculating for the purposes of this Chapter the amount of interest that would be payable on a loan for a tax year at the official rate applies for a tax year—

a

if F108an officer of Revenue and Customs so F341requires , by notice to the employee, or

b

if the employee so elects, by notice to F108an officer of Revenue and Customs .

2

Notice may be given on or before the first anniversary of the normal self-assessment filing date for the tax year in relation to which the question arises whether the loan is a taxable cheap loan.

3

The alternative method is as follows—

Step 1

Find for each day in the tax year in question the maximum amount of the loan outstanding on that day and multiply it by the official rate of interest in force on that day.

Step 2

Add together each of the amounts obtained under step 1.

Step 3

Divide the result by the number of days in the tax year.

4

Where in any tax year the cash equivalent of the benefit of the same taxable cheap loan is to be treated as earnings of two or more employees then, for the purposes of determining the cash equivalent of the benefit of the loan, the alternative method applies if—

a

the notice under subsection (1)(a) is given to all those employees, or

b

the notice under subsection (1)(b) is given by all those employees.

Supplementary provisions relating to taxable cheap loans

184Interest treated as paid

1

This section applies where F119—

a

the cash equivalent of the benefit of a taxable cheap loan is treated as earnings from an employee's employment for a tax year under section 175(1), or

b

the relevant amount in respect of the benefit of a taxable cheap loan is treated as earnings from an employee's employment for a tax year under section 175(1A).

2

The employee is to be treated for the purposes of the Tax Acts as having paid interest on the loan in that year equal to the cash equivalent.

3

But the employee is not to be treated as having paid that interest for the purposes of this Chapter or of any of F176the following Chapters of this Part—

Chapter 3 (taxable benefits: expenses payments);
Chapter 6 (taxable benefits: cars, vans and related benefits);
Chapter 10 (taxable benefits: residual liability to charge).

the same or other employment with the person who is the employer in relation to the original loan, or

b

employment with a person who is connected with that employer.

187Aggregation of loans by close company to director

1

This section applies where, in relation to any tax year, there are employment-related loans between the same lender and borrower which are aggregable with each other.

2

The lender may elect for aggregation to apply for that tax year in the case of the borrower.

3

The effect of the election is that all the aggregable loans are to be treated as a single loan for the purposes of—

section 175 (benefit of taxable cheap loan treated as earnings),
the provisions of this Chapter relating to the calculation of the cash equivalent of the benefit of a taxable cheap loan, and
section 184 (interest treated as paid).

4

For this purpose loans are aggregable for any tax year if they are made in the same currency and all the following conditions are met in relation to each of them—

a

there is a time in the tax year when—

i

the loan is outstanding,

ii

the lender is a close company, and

iii

the borrower is a director of that company;

b

at all times in the tax year the rate of interest on the loan is less than the official rate applying at that time;

c

the loan is not a qualifying loan within the meaning of section 180 (see section 180(5)).

5

An election under this section must be made by the lender in a notice given—

a

to F108an officer of Revenue and Customs , and

b

before 7th July after the end of the tax year to which the election relates.

Loan released or written off

b

it is not an employment-related loan in relation to other employment.

4

This section is subject to section 189 (exception where double charge).

189Exception where double charge

the tax payable by an employee for a tax year in respect of a loan has been decided on the basis that—

i

section 288 (limited exemption of certain bridging loans connected with employment moves), and

ii

section 289 (relief for certain bridging loans not qualifying for exemption under section 288),

will not apply because the condition in section 288(1)(b) (which requires that the limit on the exemption under section 287(1) has not been reached) will not be met, and

b

that condition is met.

5

Where a claim is made under this section the tax payable is to be adjusted accordingly.

F184Chapter 8Taxable benefits: notional loans in respect of acquisitions of shares

Annotations:

Amendments (Textual)

F184

Pt. 3 Ch. 8 repealed (with effect in accordance with Sch. 22 para. 22(2) of the amending Act) by Finance Act 2003 (c. 14), Sch. 22 para. 22(1), Sch. 43 Pt. 3(4)

Introduction

192Application of this Chapter

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Acquisition of shares for less than market value

193Notional loan where acquisition for less than market value

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

194The amount of the notional loan

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

195Discharge of notional loan: amount treated as earnings

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Supplementary provisions

196Effects on other income tax charges

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

197Minor definitions

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F74Chapter 9Taxable benefits: disposals of shares for more than market value

Annotations:

Amendments (Textual)

F74

Pt. 3 Ch. 9 repealed (with effect in accordance with Sch. 22 para. 23(2) of the amending Act) by Finance Act 2003 (c. 14), Sch. 22 para. 23(1), Sch. 43 Pt. 3(4)

198Shares to which this Chapter applies

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

199Disposal for more than market value: amount treated as earnings

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

200Minor definitions

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

C1Chapter 10Taxable benefits: residual liability to charge

Annotations:

Modifications etc. (not altering text)

Pt. 3 Ch. 10 excluded (with effect in accordance with reg. 1(2) of the amending S.I.) by The Income Tax (Exemption of Minor Benefits) (Coronavirus) Regulations 2020 (S.I. 2020/1293), regs. 1(2), 2 (with reg. 1(2))

Introduction

201Employment-related benefits

1

This Chapter applies to employment-related benefits.

2

In this Chapter—

“benefit” means a benefit or facility of any kind;
“employment-related benefit” means a benefit, other than an excluded benefit, which is provided in a tax year—
1. a
  for an employee, or
2. b
  for a member of an employee’s family or household,
by reason of the employment. For the definition of “excluded benefit” see section 202.

3

A benefit provided by an employer is to be regarded as provided by reason of the employment unless—

a

the employer is an individual, and

b

the provision is made in the normal course of the employer’s domestic, family or personal relationships.

4

For the purposes of this Chapter it does not matter whether the employment is held at the time when the benefit is provided so long as it is held at some point in the tax year in which the benefit is provided.

5

References in this Chapter to an employee accordingly include a prospective or former employee.

202Excluded benefits

1

A benefit is an “excluded benefit” for the purposes of this Chapter if—

a

any of Chapters 3 to 9 of the benefits code applies to the benefit,

b

any of those Chapters would apply to the benefit but for an exception, or

c

the benefit consists in the right to receive, or the prospect of receiving, sums treated as earnings under section 221 (payments where employee absent because of sickness or disability).

F41A

But a benefit provided to an employee or member of an employee's family or household is to be taken not to be an excluded benefit by virtue of subsection (1)(c) so far as it is provided under optional remuneration arrangements.

2

In this section “exception”, in relation to the application of a Chapter of the benefits code to a benefit, means any enactment in the Chapter which provides that the Chapter does not apply to the benefit.

But for this purpose section 86 (transport vouchers under pre-26th March 1982 arrangements) is not an exception.

Cash equivalent of benefit treated as earnings

203Cash equivalent of benefit treated as earnings

1

The cash equivalent of an employment-related benefit is to be treated as earnings from the employment for the tax year in which it is provided.

2

The cash equivalent of an employment-related benefit is the cost of the benefit less any part of that cost made good by the employee F331, to the persons providing the benefit, on or before 6 July following the tax year in which it is provided.

3

The cost of an employment-related benefit is determined in accordance with section 204 unless—

a

section 205 provides that the cost is to be determined in accordance with that section, or

b

section 206 provides that the cost is to be determined in accordance with that section.

The condition is that the employment-related benefit would be exempt from income tax but for section 228A (exclusion of certain exemptions).

7

Where it is necessary for the purposes of subsections (2)(b) and (4) to apportion an amount of earnings to the benefit provided in the tax year, the apportionment is to be made on a just and reasonable basis.

In this subsection “earnings” is to be interpreted in accordance with section 69B(5).

Determination of the cost of the benefit

204Cost of the benefit: basic rule

The cost of an employment-related benefit is the expense incurred in or in connection with provision of the benefit (including a proper proportion of any expense relating partly to provision of the benefit and partly to other matters).

any rent or hire charge payable for the asset by those providing the asset.

F2015

Where the asset is an emergency vehicle, the expense of providing fuel for it in a tax year is not an additional expense by virtue of subsection (4) so long as—

a

the person incurring that expense incurs no expense in that tax year in the provision of fuel for the vehicle which is used for the employee's private travel (“private fuel expense”), or

b

all private fuel expense that the person does incur in that tax year is made good by the employee on or before 6 July following the tax year.

6

For the purposes of this section—

“emergency vehicle” has the same meaning as in section 248A;
“fuel” includes electrical energy;
“private travel” means travelling the expenses of which, if incurred and paid by the employee, would not be deductible under Chapter 2 or 5 of Part 5.

C3205AF80Deduction for periods when asset unavailable for private use

1

A deduction is to be made under section 205(1C)(b) if the asset mentioned in section 205(1) has been unavailable for private use on any day during the tax year concerned.

2

For the purposes of this section an asset is “unavailable” for private use on any day if—

a

that day falls before the day on which the asset is first available to the employee,

b

that day falls after the day on which the asset is last available to the employee,

c

for more than 12 hours during that day the asset—

i

is not in a condition fit for use,

ii

is undergoing repair or maintenance,

iii

could not lawfully be used,

iv

is in the possession of a person who has a lien over it and who is not the employer, not a person connected with the employer, not the employee, not a member of the employee's family and not a member of the employee's household, or

v

is used in a way that is neither use by, nor use at the direction of, the employee or a member of the employee's family or household, or

d

on that day the employee—

i

uses the asset in the performance of the duties of the employment, and

ii

does not use the asset otherwise than in the performance of the duties of the employment.

3

The amount of the deduction is given by—

where—

U is the number of days, in the tax year concerned, on which the asset is unavailable for private use,

Y is the number of days in that year, and

A is the annual cost of the benefit of the asset determined under section 205(2).

4

The reference in subsection (2)(a) to the time when the asset is first available to the employee is to the earliest time when the asset is made available, by reason of the employment and without any transfer of the property in it, for private use.

5

The reference in subsection (2)(b) to the time when the asset is last available to the employee is to the last time when the asset is made available, by reason of the employment and without any transfer of the property in it, for private use.

205BReduction of cost of taxable benefit where asset is shared

1

This section applies where the cost of an employment-related benefit (“the taxable benefit”) is to be determined under section 205.

2

If, for the whole or part of the tax year concerned, the same asset is available for more than one employee's private use at the same time, the total of the amounts which are the cost of the taxable benefit for each of those employees is to be limited to the annual cost of the benefit of the asset determined in accordance with section 205(2).

3

The cost of the taxable benefit for each employee is determined by taking the amount given by section 205(1C) and then reducing that amount on a just and reasonable basis.

4

For the purposes of this section, an asset is available for an employee's private use if it is available for private use by the employee or a member of the employee's family or household.

206Cost of the benefit: transfer of used or depreciated asset

1

The cost of an employment-related benefit is determined in accordance with this section if—

a

the benefit consists in the transfer of an asset, and

b

the asset has been used, or has depreciated, since the person transferring the asset (“the transferor”) acquired or produced it.

2

The cost of the benefit is the market value of the asset at the time of the transfer.

3

But the cost of the benefit (“the current benefit”) is the higher of the market value of the asset at the time of the transfer and the amount calculated in accordance with subsection (5) if—

a

the asset is not F92an excluded asset (see subsection (6)) ,

b

the asset has previously been applied in the provision of a relevant employment-related benefit (whether or not the person provided with that benefit is also the transferee), and

c

the transferor first applied the asset in the provision of an employment-related benefit after 5th April 1980.

4

In this section “relevant employment-related benefit” means an employment-related benefit the cost of which was to be determined in accordance with section 205.

5

The amount referred to in subsection (3) is calculated in accordance with the following steps—

Step 1

Determine the tax years in which the asset was applied in the provision of a relevant employment-related benefit (including, if appropriate, the current tax year).

Step 2

Determine the cost of the benefit for each of those tax years in accordance with section 205.

Step 3

Calculate the total of the amounts determined under step 2.

Step 4

Calculate the market value of the asset at the time when the transferor first applied it in the provision of an employment-related benefit.

Step 5

Deduct the total calculated under step 3 from the market value calculated under step 4.

The result is the amount referred to in subsection (3).

F1906

An excluded asset is—

a

a car (within the meaning of Chapter 6),

b

computer equipment that has previously been applied as mentioned in subsection (3)(b) in circumstances in which the conditions set out in section 320 were met, or

c

a cycle or cyclist's safety equipment that has previously been so applied in circumstances in which the conditions set out in section 244 were met.

Supplementary provisions

207Meaning of “annual rental value”

1

For the purposes of this Chapter the “annual rental value” of land is the rent which might reasonably be expected to be obtained on a letting from year to year if—

In this section “relevant service” means a service other than the repair, insurance or maintenance of the land or of any other land.

208Meaning of “market value”

For the purposes of this Chapter the market value of an asset at any time is the price which the asset might reasonably be expected to fetch on a sale in the open market at that time.

209Meaning of “persons providing benefit”

For the purposes of this Chapter the persons providing a benefit are the person or persons at whose cost the benefit is provided.

210Power to exempt minor benefits

1

The Treasury may make provision by regulations for exempting from the application of this Chapter such minor benefits as may be specified in the regulations.

2

An exemption conferred by such regulations is conditional on the benefit being made available to the employer’s employees generally on similar terms.

Special rules for scholarships

211Special rules for scholarships: introduction

1

Sections 212 to 214 supplement the preceding provisions of this Chapter in the following ways—

section 212 provides for certain scholarships provided under arrangements entered into by an employer or a connected person to be regarded as provided by reason of an employment;
section 213 provides that this Chapter does not apply to certain scholarships provided under a trust fund or a scheme;
section 214 provides a different method of determining the cost of an employment-related benefit if it consists in the provision of a scholarship from a trust fund.

2

Section 215 limits the extent to which F42section 776(1) of ITTOIA 2005 (exemption for scholarship income) applies to a scholarship whose provision constitutes an employment-related benefit.

3

In this section and sections 212 to 215 “scholarship” includes a bursary, exhibition or other similar educational endowment.

212Scholarships provided under arrangements entered into by employer or connected person

1

A scholarship which is provided for a member of an employee’s family or household is to be regarded for the purposes of this Chapter as provided by reason of the employment if it is provided under arrangements entered into by—

a

the employer, or

b

a person connected with the employer.

2

Subsection (1) applies whether or not the arrangements require the employer or the connected person to contribute directly or indirectly to the cost of providing the scholarship.

3

A scholarship is not to be regarded as provided by reason of an employment by virtue of subsection (1) if—

a

the employer is an individual, and

b

the arrangements are made in the normal course of the employer’s domestic, family or personal relationships.

4

This section is without prejudice to section 201(3).

213Exception for certain scholarships under trusts or schemes

1

This Chapter does not apply to an employment-related benefit consisting in the provision of a scholarship if conditions A, B, C and D are met.

2

Condition A is that the scholarship would not be regarded as provided by reason of the employment if section 201(3) and section 212 were disregarded.

3

Condition B is that the holder of the scholarship is a full-time student.

4

Condition C is that the scholarship is provided from a trust fund or under a scheme.

5

Condition D is that, in the tax year in which the scholarship is provided, not more than 25% of the total amount of relevant payments is attributable to scholarships provided by reason of a person’s employment.

6

For the purposes of conditions B and D “full-time student” means a person who is in full-time education at a university, college, school or other educational establishment.

7

For the purposes of condition D—

“employment” includes any employment within the meaning of the employment income Parts (see section 4), whether or not it is a taxable employment under Part 2;
“relevant payments” means the payments made from the fund or scheme mentioned in condition C in respect of scholarships held by full-time students.

214Scholarships: cost of the benefit

If an employment-related benefit consists in the provision of a scholarship from a trust fund—

a

section 204 does not apply, and

b

the cost of the benefit is the total of the payments made from the fund to the person holding the scholarship.

215Limitation of exemption for scholarship income in F209section 776(1) of ITTOIA 2005

If an employment-related benefit consists in the provision of a scholarship, F192section 776(1) of ITTOIA 2005 (exemption for scholarship income) applies only in relation to the holder of the scholarship.

F65Chapter 11Taxable benefits: exclusion of lower-paid employments from parts of benefits code

Annotations:

Amendments (Textual)

F65

Pt. 3 Ch. 11 omitted (with effect in accordance with s. 13(4) of the amending Act) by virtue of Finance Act 2015 (c. 11), s. 13(1)

Introduction

216Provisions not applicable to lower-paid employments

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

What is lower-paid employment

217Meaning of “lower-paid employment”

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

218Calculation of earnings rate for a tax year

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

219Extra amounts to be added in connection with a car

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Chapter 12F234Other amounts treated as earnings

Annotations:

Amendments (Textual)

F234

Words in Pt. 3 Ch. 12 heading substituted (1.9.2013) by Finance Act 2013 (c. 29), Sch. 23 paras. 4(a), 38; S.I. 2013/1755, art. 2

F187Shares of employee shareholders

Annotations:

Amendments (Textual)

F187

Ss. 226A-226D and cross-heading inserted (1.9.2013) by Finance Act 2013 (c. 29), Sch. 23 paras. 3, 38; S.I. 2013/1755, art. 2

226AAmount treated as earnings

1

This section applies if shares having a market value of no less than £2000 are acquired by an employee in consideration of an employee shareholder agreement.

2

An amount F308equal to the market value of the shares is to be treated as earnings from the employment, in respect of the acquisition of the shares, for the tax year in which they are acquired.

But this is subject to subsection (4).

F2953

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4

If the shares are acquired pursuant to an employment-related securities option, subsection (2) does not apply.

5

If subsection (2) applies, nothing else constitutes earnings under this Part from the employment in respect of the acquisition of the shares.

6

For the purposes of this section F13...—

shares are “acquired” by an employee if the employee becomes beneficially entitled to them (and they are acquired at the time when the employee becomes so entitled);
“employee shareholder agreement” means an agreement by virtue of which an employee is an employee shareholder (see section 205A(1)(a) to (d) of the Employment Rights Act 1996);
“employee shareholder share” means a share acquired by an employee in consideration of an employee shareholder agreement;
“employee” and “employer company”, in relation to an employee shareholder agreement, mean the individual and the company which enter into the agreement;
“employment-related securities option” has the same meaning as in Chapter 5 of Part 7 (see section 471(5));
“market value” has the same meaning as it has for the purposes of TCGA 1992 by virtue of Part 8 of that Act; and the market value of shares is their market value on the day on which they are acquired (but see also subsection (7)).

7

For the purposes of subsection (1) F150(but not subsection (2)) , the market value of the shares is to be determined ignoring—

a

any election under section 431 (election for market value of restricted shares to be calculated as if not restricted), and

b

section 437 (market value of convertible securities to be determined as if not convertible).

F167226BDeemed payment for employee shareholder shares

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F167226COnly one payment deemed to be made under associated agreements

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F167226DShareholder or connected person having material interest in company

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F9Sporting testimonial payments

Annotations:

Amendments (Textual)

S. 226E and cross-heading inserted (with effect in accordance with Sch. 2 para. 4(1) of the amending Act) by Finance Act 2016 (c. 24), Sch. 2 para. 1

that any person who is responsible (alone or with others) for collecting the donations or who is the controller (or a member of a committee which is the controller) of the activity is not—

In this section—

“controller”, in relation to an event or activity which meets the conditions in subsection (3)(a) and (b), means the person who controls the disbursement of any money raised for or for the benefit of S from that event or activity,
“money” includes money's worth and “payment” includes the transfer of money's worth or the provision of any benefit,
“prescribed person” means a person prescribed in regulations made by the Treasury.

10

Section 993 of ITA 2007 (meaning of “connected” persons) has effect for the purposes of this section.