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Chapter 10 | |
Taxable benefits: residual liability to charge | |
Introduction | |
201 Employment-related benefits | |
(1) This Chapter applies to employment-related benefits. | 5 |
(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— | |
(a) for an employee, or | 10 |
(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— | 15 |
(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 | 20 |
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. | |
202 Excluded benefits | |
(1) A benefit is an “excluded benefit” for the purposes of this Chapter if— | 25 |
(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 | 30 |
absent because of sickness or disability). | |
(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 | 35 |
arrangements) is not an exception. | |
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Cash equivalent of benefit treated as earnings | |
203 Cash 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 | 5 |
less any part of that cost made good by the employee to the persons providing | |
the benefit. | |
(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 | 10 |
with that section, or | |
(b) section 206 provides that the cost is to be determined in accordance | |
with that section. | |
Determination of the cost of the benefit | |
204 Cost of the benefit: basic rule | 15 |
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). | |
205 Cost of the benefit: asset made available without transfer | |
(1) The cost of an employment-related benefit (“the taxable benefit”) is determined | 20 |
in accordance with this section if— | |
(a) the benefit consists in— | |
(i) an asset being placed at the disposal of the employee, or at the | |
disposal of a member of the employee’s family or household, | |
for the employee’s or member’s use, or | 25 |
(ii) an asset being used wholly or partly for the purposes of the | |
employee or a member of the employee’s family or household, | |
and | |
(b) there is no transfer of the property in the asset. | |
(2) The cost of the taxable benefit is the higher of— | 30 |
(a) the annual value of the use of the asset, and | |
(b) the annual amount of the sums, if any, paid by those providing the | |
benefit by way of rent or hire charge for the asset, | |
together with the amount of any additional expense. | |
(3) For the purposes of subsection (2), the annual value of the use of an asset is— | 35 |
(a) in the case of land, its annual rental value; | |
(b) in any other case, 20% of the market value of the asset at the time when | |
those providing the taxable benefit first applied the asset in the | |
provision of an employment-related benefit (whether or not the person | |
provided with that benefit is also the person provided with the taxable | 40 |
benefit). | |
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If those providing the taxable benefit first applied the asset in the provision of | |
an employment-related benefit before 6th April 1980, paragraph (b) is to be | |
read as if the reference to 20% were a reference to 10%. | |
(4) In this section “additional expense” means the expense incurred in or in | |
connection with provision of the taxable benefit (including a proper proportion | 5 |
of any expense relating partly to provision of the benefit and partly to other | |
matters), other than— | |
(a) the expense of acquiring or producing the asset incurred by the person | |
to whom the asset belongs, and | |
(b) any rent or hire charge payable for the asset by those providing the | 10 |
asset. | |
206 Cost 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 | 15 |
(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 | 20 |
accordance with subsection (5) if— | |
(a) the asset is not a car (within the meaning of Chapter 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 | 25 |
(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 of this Act. | 30 |
(5) The amount referred to in subsection (3) is calculated in accordance with the | |
following steps— | |
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Step 1 | |
Determine the tax years in which the asset was applied in the provision of a | 35 |
relevant employment-related benefit (including, if appropriate, the current tax | |
year). | |
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Step 2 | |
Determine the cost of the benefit for each of those tax years in accordance with | 40 |
section 205. | |
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Step 3 | |
Calculate the total of the amounts determined under step 2. | |
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Step 4 | |
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Calculate the market value of the asset at the time when the transferor first | |
applied it in the provision of an employment-related benefit. | |
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Step 5 | |
Deduct the total calculated under step 3 from the market value calculated | 5 |
under step 4. | |
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The result is the amount referred to in subsection (3). | |
Supplementary provisions | |
207 Meaning of “annual rental value” | 10 |
(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— | |
(a) the tenant undertook to pay all taxes, rates and charges usually paid by | |
a tenant, and | 15 |
(b) the landlord undertook to bear the costs of the repairs and insurance | |
and other expenses (if any) necessary for maintaining the land in a state | |
to command the rent. | |
(2) For the purposes of subsection (1) that rent— | |
(a) is to be taken to be the amount that might reasonably be expected to be | 20 |
so obtained in respect of the letting, and | |
(b) is to be calculated on the basis that the only amounts that may be | |
deducted in respect of services provided by the landlord are amounts | |
in respect of the cost to the landlord of providing any relevant services. | |
(3) If the land is of a kind that might reasonably be expected to be let on terms | 25 |
under which— | |
(a) the landlord is to provide any services which are either— | |
(i) relevant services, or | |
(ii) the repair, insurance or maintenance of any premises which do | |
not form part of the land but belong to or are occupied by the | 30 |
landlord, and | |
(b) amounts are payable in respect of the services in addition to the rent, | |
the rent to be established under subsection (1) in respect of the land is to | |
include so much of those additional amounts as exceeds the cost to the | |
landlord of providing the services. | 35 |
(4) In this section “relevant service” means a service other than the repair, | |
insurance or maintenance of the land or of any other land. | |
208 Meaning 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 | 40 |
open market at that time. | |
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