Income Tax (Earnings and Pensions) Act 2003

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

Chapter 1 U.K. Earnings

62 Earnings U.K.

(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 2 U.K. Taxable benefits: the benefits code

The benefits code U.K.

63 The benefits code U.K.

(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), [F1 and]

• F2 ...

• F2 ...

• Chapter 10 (residual liability to charge)

• F3 ...

F4 (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F4 (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F4 (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F5 (5) The benefits code has effect subject to section 554Z2(2).]

Textual Amendments

F1 Word in s. 63(1) inserted (with effect in accordance with s. 13(4) of the amending Act) by Finance Act 2015 (c. 11), Sch. 1 para. 5(2)(a)

F2 S. 63(1) entries repealed (with effect in accordance with Sch. 22 para. 20(2) of the amending Act) by Finance Act 2003 (c. 14), Sch. 22 para. 20(1), Sch. 43 Pt. 3(4)

F3 Words in s. 63(1) omitted (with effect in accordance with s. 13(4) of the amending Act) by virtue of Finance Act 2015 (c. 11), Sch. 1 para. 5(2)(b)

F4 S. 63(2)-(4) omitted (with effect in accordance with s. 13(4) of the amending Act) by virtue of Finance Act 2015 (c. 11), Sch. 1 para. 5(3)

F5 S. 63(5) inserted (with effect in accordance with Sch. 2 paras. 52-59 of the amending Act) by Finance Act 2011 (c. 11), Sch. 2 para. 8

64 Relationship between earnings and benefits code U.K.

(1) This section applies if, apart from this section, the same benefit would give rise to two amounts (“A” and “B”)—

(a) A being an amount of earnings as defined in Chapter 1 of this Part, and

(b) B being an amount to be treated as earnings under the benefits code.

(2) In such a case—

(a) A constitutes earnings as defined in Chapter 1 of this Part, and

(b) the amount (if any) by which B exceeds A is to be treated as earnings under the benefits code.

(3) This section does not apply in connection with living accommodation to which Chapter 5 of this Part applies.

(4) In that case section 109 applies to determine the relationship between that Chapter and Chapter 1 of this Part.

F6 (5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F6 (6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F6 S. 64(5)(6) repealed (with effect in accordance with Sch. 22 para. 21(2) of the amending Act) by Finance Act 2003 (c. 14), Sch. 22 para. 21(1), Sch. 43 Pt. 3(4)

F7 65 Dispensations relating to benefits within provisions not applicable to lower-paid employment U.K.

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

Textual Amendments

F7 S. 65 omitted (with effect in accordance with s. 12(5) of the amending Act) by virtue of Finance Act 2015 (c. 11), s. 12(2) (with s. 12(6)(7))

General definitions for benefits code U.K.

66 Meaning of “employment” and related expressions U.K.

(1) In the benefits code—

(a) “employment” means a taxable employment under Part 2, and

(b) “employed”, “employee” and “employer” have corresponding meanings.

(2) Where a Chapter of the benefits code applies in relation to an employee—

(a) references in that Chapter to “the employment” are to the employment of that employee, and

(b) references in that Chapter to “the employer” are to the employer in respect of that employment.

(3) For the purposes of the benefits code an employment is a “taxable employment under Part 2” in a tax year if the earnings from the employment for that year are (or would be if there were any) general earnings to which the charging provisions of Chapter 4 or 5 of Part 2 apply.

(4) In subsection (3)—

(a) the reference to an employment includes employment as a director of a company, and

(b) “earnings” means earnings as defined in Chapter 1 of this Part.

[F8 (5) In the benefits code “lower-paid employment as a minister of religion” has the same meaning as in Part 4 (see section 290D).]

Textual Amendments

F8 S. 66(5) inserted (with effect in accordance with s. 13(4) of the amending Act) by Finance Act 2015 (c. 11), Sch. 1 para. 6

67 Meaning of “director” and “full-time working director” U.K.

(1) In the benefits code “director” means—

(a) in relation to a company whose affairs are managed by a board of directors or similar body, a member of that body,

(b) in relation to a company whose affairs are managed by a single director or similar person, that director or person, and

(c) in relation to a company whose affairs are managed by the members themselves, a member of the company,

and includes any person in accordance with whose directions or instructions the directors of the company (as defined above) are accustomed to act.

(2) For the purposes of subsection (1) a person is not to be regarded as a person in accordance with whose directions or instructions the directors of the company are accustomed to act merely because the directors act on advice given by that person in a professional capacity.

(3) In the benefits code “full-time working director” means a director who is required to devote substantially the whole of his time to the service of the company in a managerial or technical capacity.

68 Meaning of “material interest” in a company U.K.

(1) For the purposes of the benefits code a person has a material interest in a company if condition A or B is met.

(2) Condition A is that the person (with or without one or more associates) or any associate of that person (with or without one or more [F9 other such associates]) is—

(a) the beneficial owner of, or

(b) able to control, directly or through the medium of other companies or by any other indirect means,

more than 5% of the ordinary share capital of the company.

(3) Condition B is that, in the case of a close company, the person (with or without one or more associates) or any associate of that person (with or without one or more [F10 other such associates]), possesses or is entitled to acquire, such rights as would—

(a) in the event of the winding-up of the company, or

(b) 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 [F11 section 448 of CTA 2010] except that, for this purpose, “relative” in [F12 section 448(1)] has the meaning given by subsection (5) below, and

• “participator” has the meaning given by [F13 section 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 [F14 or civil partner],

(b) a parent, child or remoter relation in the direct line either of B or of B’s spouse [F14 or civil partner],

(c) a brother or sister of B or of B’s spouse [F14 or civil partner], or

(d) the spouse [F14 or civil partner] of a person falling within paragraph (b) or (c).

Textual Amendments

F9 Words in s. 68(2) substituted (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), s. 1184(1), Sch. 1 para. 383(2) (with Sch. 2)

F10 Words in s. 68(3) substituted (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), s. 1184(1), Sch. 1 para. 383(3) (with Sch. 2)

F11 Words in s. 68(4) substituted (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), s. 1184(1), Sch. 1 para. 383(4)(a)(i) (with Sch. 2)

F12 Words in s. 68(4) substituted (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), s. 1184(1), Sch. 1 para. 383(4)(a)(ii) (with Sch. 2)

F13 Words in s. 68(4) substituted (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), s. 1184(1), Sch. 1 para. 383(4)(b) (with Sch. 2)

F14 Words in s. 68(5) inserted (5.12.2005) by The Tax and Civil Partnership Regulations 2005 (S.I. 2005/3229), regs. 1(1), 140

69 Extended meaning of “control” U.K.

(1) The definition of “control” in [F15 section 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.

Textual Amendments

F15 Words in s. 69(1) substituted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 430 (with Sch. 2)

[F16 69A Optional remuneration arrangements U.K.

(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)

Textual Amendments

F16 Ss. 69A, 69B inserted (with effect in accordance with Sch. 2 para. 62 of the amending Act) by Finance Act 2017 (c. 10), Sch. 2 para. 1

69B Optional remuneration arrangements: supplementary U.K.

(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).]

Textual Amendments

F16 Ss. 69A, 69B inserted (with effect in accordance with Sch. 2 para. 62 of the amending Act) by Finance Act 2017 (c. 10), Sch. 2 para. 1

Chapter 3 U.K. Taxable benefits: expenses payments

70 Sums in respect of expenses U.K.

(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.

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

(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.

72 Sums in respect of expenses treated as earnings U.K.

(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);

• [F17 section 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).

Textual Amendments

F17 Words in s. 72(3) inserted (with effect in accordance with art. 4 of the amending S.I.) by The Enactment of Extra-Statutory Concessions Order 2014 (S.I. 2014/211), arts. 1, 3

Chapter 4 U.K. Taxable benefits: vouchers and credit-tokens

Cash vouchers: introduction U.K.

73 Cash vouchers to which this Chapter applies U.K.

(1) This Chapter applies to a cash voucher provided for an employee by reason of the employment which is received by the employee.

(2) A cash voucher provided for an employee 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.

(3) A cash voucher provided for an employee and appropriated to the employee—

(a) by attaching it to a card held for the employee, or

(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.

74 Provision for, or receipt by, member of employee’s family U.K.

For the purposes of this Chapter any reference to a 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 “cash voucher” U.K.

75 Meaning of “cash voucher” U.K.

(1) In this Chapter “cash voucher” means a voucher, stamp or similar document capable of being exchanged for a sum of money which is—

(a) greater than,

(b) equal to, or

(c) not substantially less than,

the expense incurred by the person at whose cost the voucher, stamp or similar document is provided.

(2) For the purposes of subsection (1) it does not matter whether the document—

(a) is also capable of being exchanged for goods or services;

(b) is capable of being exchanged singly or together with other vouchers, stamps, or documents;

(c) is capable of being exchanged immediately or only after a time.

(3) Subsection (1) is subject to section 76 (sickness benefits-related voucher).

76 Sickness benefits-related voucher U.K.

(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—

or

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.

77 Apportionment of cost of provision of voucher U.K.

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 U.K.

78 Voucher made available to public generally U.K.

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.

79 Voucher issued under approved scheme U.K.

(1) This Chapter does not apply to a cash voucher received by an employee if—

(a) it is issued under a scheme, and

(b) at the time when it is received the scheme is a scheme approved by [F18 an officer of Revenue and Customs] for the purposes of this section.

(2) [F18 An officer of Revenue and Customs] must not approve a scheme for the purposes of this section unless [F19 the officer] [F20 is] satisfied that it is practicable for income tax in respect of all payments made in exchange for vouchers issued under the scheme to be deducted in accordance with PAYE regulations.

Textual Amendments

F18 Words in Act substituted (18.4.2005) by Commissioners for Revenue and Customs Act 2005 (c. 11), s. 53(1), Sch. 4 para. 102(1); S.I. 2005/1126, art. 2(2)(h)

F19 Words in s. 79(2) substituted (18.4.2005) by Commissioners for Revenue and Customs Act 2005 (c. 11), s. 53(1), Sch. 4 para. 103(1)(c); S.I. 2005/1126, art. 2(2)(h)

F20 Word in s. 79(2) substituted (18.4.2005) by Commissioners for Revenue and Customs Act 2005 (c. 11), s. 53(1), Sch. 4 para. 107; S.I. 2005/1126, art. 2(2)(h)

80 Vouchers where payment of sums exempt from tax U.K.

This Chapter does not apply to a cash voucher if it is—

(a) a document intended to enable a person to obtain payment of a sum which would not have constituted employment income if paid to the person directly, or

(b) a savings certificate where the accumulated interest payable in respect of it is exempt from tax (or would be so exempt if certain conditions were met).

Benefit of cash voucher treated as earnings U.K.

81 Benefit of cash voucher treated as earnings U.K.

(1) The cash equivalent of the benefit of a cash voucher to which this Chapter applies is to be treated as earnings from the employment for the tax year in which the voucher is received by the employee.

[F21 (1A) Where a cash voucher to which this Chapter applies is provided pursuant to optional remuneration arrangements—

(a) subsection (1) does not apply, and

(b) the relevant amount is to be treated as earnings from the employment for the tax year in which the voucher is received by the employee.

(1B) In this section “the relevant amount” means—

(a) the cash equivalent, or

(b) if greater, the amount foregone with respect to the benefit of the voucher (see section 69B).]

(2) The cash equivalent is the sum of money for which the voucher is capable of being exchanged.

[F22 (3) For the purposes of subsection (1B), assume that the cash equivalent is zero if the condition in subsection (4) is met.

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

Textual Amendments

F21 S. 81(1A)(1B) inserted (with effect in accordance with Sch. 2 para. 62 of the amending Act) by Finance Act 2017 (c. 10), Sch. 2 para. 3(2)

F22 S. 81(3)(4) inserted (with effect in accordance with Sch. 2 para. 62 of the amending Act) by Finance Act 2017 (c. 10), Sch. 2 para. 3(3)

Non-cash vouchers: introduction U.K.

82 Non-cash vouchers to which this Chapter applies U.K.

(1) This Chapter applies to a non-cash voucher provided for an employee by reason of the employment which is received by the employee.

(2) A non-cash voucher provided for an employee 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.

(3) A non-cash voucher provided for an employee and appropriated to the employee—

(a) by attaching it to a card held for the employee, or

(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.

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

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” U.K.

84 Meaning of “non-cash voucher” U.K.

(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,

[F23 (ab) 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.

[F24 (2A) 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.

Textual Amendments

F23 S. 84(1)(ab) inserted (with effect in accordance with s. 78(2) of the amending Act) by Finance Act 2004 (c. 12), Sch. 13 para. 2(2)(a)

F24 S. 84(2A) inserted (with effect in accordance with s. 78(2) of the amending Act) by Finance Act 2004 (c. 12), Sch. 13 para. 2(2)(b)

Non-cash voucher: exceptions U.K.

85 Non-cash voucher made available to public generally U.K.

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.

86 Transport vouchers under pre-26th March 1982 arrangements U.K.

(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 [F25 1159 of and Schedule 6 to] the Companies Act [F26 2006].

Textual Amendments

F25 Words in s. 86(3) substituted (1.10.2009) by The Companies Act 2006 (Consequential Amendments) (Taxes and National Insurance) Order 2009 (S.I. 2009/1890), arts. 1(1), 4(1)(g)

F26 Word in s. 86(3) substituted (1.10.2009) by The Companies Act 2006 (Consequential Amendments) (Taxes and National Insurance) Order 2009 (S.I. 2009/1890), arts. 1(1), 4(1)(g)

Benefit of non-cash voucher treated as earnings U.K.

87 Benefit of non-cash voucher treated as earnings U.K.

(1) The cash equivalent of the benefit of a non-cash voucher to which this Chapter applies is to be treated as earnings from the employment for the tax year in which the voucher is received by the employee.

(2) The cash equivalent is the difference between—

(a) the cost of provision, and

(b) any part of that cost made good by the employee [F27 , to the person incurring it, on or before 6 July following the relevant tax year].

[F28 (2A) If the voucher is a non-cash voucher other than a cheque voucher, the relevant tax year is—

(a) the tax year in which the cost of provision is incurred, or

(b) if later, the tax year in which the employee receives the voucher.

(2B) If the voucher is a cheque voucher, the relevant tax year is the tax year in which the voucher is handed over in exchange for money, goods or services.]

(3) In this Chapter the “cost of provision” means, in relation to a non-cash voucher, the expense incurred in or in connection with the provision of—

(a) the voucher, and

(b) the money, goods or services for which it is capable of being exchanged,

by the person at whose cost they are provided.

[F29 (3A) 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.

F30 (6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F27 Words in s. 87(2)(b) substituted (with effect in accordance with s. 1(14) of the amending Act) by Finance (No. 2) Act 2017 (c. 32), s. 1(2)(a)

F28 S. 87(2A)(2B) inserted (with effect in accordance with s. 1(14) of the amending Act) by Finance (No. 2) Act 2017 (c. 32), s. 1(2)(b)

F29 S. 87(3A) inserted (with effect in accordance with s. 78(2) of the amending Act) by Finance Act 2004 (c. 12), Sch. 13 para. 2(3)

F30 S. 87(6) omitted (with effect in accordance with Sch. 39 para. 50(3) of the amending Act) by virtue of Finance Act 2012 (c. 14), Sch. 39 para. 50(2)

[F31 87A Benefit of non-cash voucher treated as earnings: optional remuneration arrangements U.K.

(1) Where a non-cash voucher to which this Chapter applies is provided pursuant to optional remuneration arrangements—

(a) the relevant amount is to be treated as earnings from the employment for the tax year in which the voucher is received by the employee, and

(b) section 87(1) does not apply.

(2) To find the relevant amount, first determine which (if any) is the greater of—

(a) the cost of provision (see section 87(3)), and

(b) the amount foregone with respect to the benefit of the voucher (see section 69B).

(3) If the cost of provision is greater than or equal to the amount foregone, the “relevant amount” is the cash equivalent of the benefit of the non-cash voucher (see section 87(2)).

(4) Otherwise, the “relevant amount” is the difference between—

(a) the amount foregone, and

(b) any part of the cost of provision that is made good by the employee, to the person incurring it, on or before 6 July following the relevant tax year.

(5) If the voucher is a non-cash voucher other than a cheque voucher, the relevant tax year is—

(a) the tax year in which the cost of provision is incurred, or

(b) if later, the tax year in which the employee receives the voucher.

(6) If the voucher is a cheque voucher, the relevant tax year is the tax year in which the voucher is handed over in exchange for money, goods or services.

(7) 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).]

Textual Amendments

F31 S. 87A inserted (with effect in accordance with Sch. 2 para. 62 of the amending Act) by Finance Act 2017 (c. 10), Sch. 2 para. 4

88 Year in which earnings treated as received U.K.

(1) In the case of a non-cash voucher other than a cheque voucher, the amount treated as earnings under section 87 [F32 or 87A] is to be treated as received—

(a) in the tax year in which the cost of provision is incurred, or

(b) if later, in the tax year in which the voucher is received by the employee.

(2) In the case of a cheque voucher, the amount treated as earnings under section 87 [F33 or 87A] is to be treated as received in the tax year in which the voucher is handed over in exchange for money, goods or services.

(3) [F34 For the purposes of subsection (2) and sections 87(2B) and 87A(6),] Where a cheque voucher is posted it is to be treated as handed over at the time of posting.

Textual Amendments

F32 Words in s. 88(1) inserted (with effect in accordance with Sch. 2 para. 62 of the amending Act) by Finance Act 2017 (c. 10), Sch. 2 para. 5(a)

F33 Words in s. 88(2) inserted (with effect in accordance with Sch. 2 para. 62 of the amending Act) by Finance Act 2017 (c. 10), Sch. 2 para. 5(b)

F34 Words in s. 88(3) inserted (with effect in accordance with s. 1(14) of the amending Act) by Finance (No. 2) Act 2017 (c. 32), s. 1(3)

F35 89 Reduction for meal vouchers U.K.

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

Textual Amendments

F35 S. 89 repealed (with effect in accordance with Sch. 39 para. 50(3) of the amending Act) by Finance Act 2012 (c. 14), Sch. 39 para. 50(1)

Credit-tokens: introduction U.K.

90 Credit-tokens to which this Chapter applies U.K.

(1) This Chapter applies to a credit-token provided for an employee by reason of the employment which is used by the employee to obtain money, goods or services.

(2) A credit-token provided for an employee 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.

91 Provision for, or use by, member of employee’s family U.K.

For the purposes of this Chapter—

(a) any reference to a credit-token being provided for an employee includes a reference to it being provided for a member of the employee’s family, and

(b) use of a credit-token by a member of an employee’s family is to be treated as use of the token by the employee.

Meaning of “credit-token” U.K.

92 Meaning of “credit-token” U.K.

(1) In this Chapter “credit-token” means a credit card, debit card or other card, a token, a document or other object given to a person by another person (“X”) who undertakes—

(a) on the production of it, to supply money, goods or services on credit, or

(b) if a third party (“Y”) supplies money, goods or services on its production, to pay Y for what is supplied.

(2) A card, token, document or other object can be a credit-token even if—

(a) some other action is required in addition to its production in order for the money, goods or services to be supplied;

(b) X in paying Y may take a discount or commission.

(3) For the purposes of this section—

(a) the use of an object given by X to operate a machine provided by X is to be treated as its production to X, and

(b) the use of an object given by X to operate a machine provided by Y is to be treated as its production to Y.

(4) A “credit-token” does not include a cash voucher or a non-cash voucher.

Credit-tokens: exception U.K.

93 Credit-token made available to public generally U.K.

This Chapter does not apply to a credit-token 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.

Benefit of credit-token treated as earnings U.K.

94 Benefit of credit-token treated as earnings U.K.

(1) On each occasion on which a credit-token to which this Chapter applies is used by the employee in a tax year to obtain money, goods or services, the cash equivalent of the benefit of the token is to be treated as earnings from the employment for that year.

(2) The cash equivalent is the difference between—

(a) the cost of provision, and

(b) any part of that cost made good by the [F36 employee—

(i) to the person incurring it, and

(ii) on or before 6 July following the tax year which contains the occasion in question.]

(3) In this section the “cost of provision” means the expense incurred—

(a) in or in connection with the provision of the money, goods or services obtained on the occasion in question, and

(b) by the person at whose cost they are provided.

(4) If a person incurs expense in or in connection with the provision of credit-tokens 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.

Textual Amendments

F36 Words in s. 94(2)(b) substituted (with effect in accordance with s. 1(14) of the amending Act) by Finance (No. 2) Act 2017 (c. 32), s. 1(4)

[F37 94A Benefit of credit-token treated as earnings: optional remuneration arrangements U.K.

(1) If the conditions in subsections (2) and (3) are met in relation to any occasions on which a credit-token to which this Chapter applies is used by the employee in a tax year to obtain money, goods or services—

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

(b) section 94(1) does not apply in relation to the use of the credit-token on those occasions.

(2) The condition in this subsection is that the credit-token is used pursuant to optional remuneration arrangements.

(3) The condition in this subsection is that AF is greater than the relevant cost of provision for the tax year.

In this section “AF” means so much of the amount foregone (see section 69B) as is attributable on a just and reasonable basis to the use of the credit-token by the employee in the tax year pursuant to the optional remuneration arrangements to obtain money, goods or services.

(4) The “relevant amount” is the difference between—

(a) AF, and

(b) any part of the relevant cost of provision for the tax year that is made good by the employee, to the person incurring it, on or before 6 July following the tax year which contains the occasion of use of the credit-token to which the making good relates.

(5) But the relevant amount is taken to be zero if the amount given by paragraph (b) of subsection (4) exceeds AF.

(6) For the purposes of this section the “relevant cost of provision for the tax year” is determined as follows—

• Step 1 Find the cost of provision with respect to each occasion of use of the credit-token by the employee in the tax year pursuant to the optional remuneration arrangements to obtain money, goods or services.

• Step 2 The total of those amounts is the relevant cost of provision for the tax year.

(7) But the relevant cost of provision for the tax year is to be taken to be zero if the condition in subsection (8) is met.

(8) The condition is that use of the credit token by the employee in the tax year pursuant to the optional remuneration arrangements to obtain money, goods or services would be exempt from income tax but for section 228A (exclusion of certain exemptions).

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

Textual Amendments

F37 S. 94A inserted (with effect in accordance with Sch. 2 para. 62 of the amending Act) by Finance Act 2017 (c. 10), Sch. 2 para. 6

General supplementary provisions U.K.

95 Disregard for money, goods or services obtained U.K.

(1) This section applies if the cash equivalent of the benefit of a cash voucher, a non-cash voucher or a credit-token [F38 or 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, F39 ...

F39 (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(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).

[F40 (3A) 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.

Textual Amendments

F38 Words in s. 95(1) inserted (with effect in accordance with Sch. 2 para. 62 of the amending Act) by Finance Act 2017 (c. 10), Sch. 2 para. 51

F39 S. 95(1)(b) and word omitted (with effect in accordance with s. 12(5) of the amending Act) by virtue of Finance Act 2015 (c. 11), s. 12(4)(a)

F40 S. 95(3A) inserted (with effect in accordance with s. 78(2) of the amending Act) by Finance Act 2004 (c. 12), Sch. 13 para. 2(4)

F41 96 Dispensations relating to vouchers or credit-tokens U.K.

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

Textual Amendments

F41 S. 96 omitted (with effect in accordance with s. 12(5) of the amending Act) by virtue of Finance Act 2015 (c. 11), s. 12(3) (with s. 12(6)(7))

[F42 96A Power to exempt use of non-cash vouchers or credit-tokens to obtain exempt benefits U.K.

(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).]

Textual Amendments

F42 S. 96A inserted (19.7.2006) by Finance Act 2006 (c. 25), s. 63

Chapter 5 U.K. Taxable benefits: living accommodation

Living accommodation U.K.

97 Living accommodation to which this Chapter applies U.K.

(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.

[F43 (1A) 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 [F44 an 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.

Textual Amendments

F43 S. 97(1A) inserted (with effect in accordance with s. 7(9) of the amending Act) by Finance Act 2016 (c. 24), s. 7(2)

F44 Words in s. 97(1A)(b) substituted (with effect in accordance with Sch. 2 para. 62 of the amending Act) by Finance Act 2017 (c. 10), Sch. 2 para. 7

Exceptions U.K.

98 Accommodation provided by local authority U.K.

[F45 In 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.

Textual Amendments

F45 Words in s. 98 substituted (with effect in accordance with Sch. 2 para. 62 of the amending Act) by Finance Act 2017 (c. 10), Sch. 2 para. 8

99 Accommodation provided for performance of duties U.K.

(1) [F46 In 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 it is necessary for the proper performance of the employee’s duties that the employee should reside in it.

(2) [F47 In section 102 (benefit of accommodation treated as earnings) subsection (1A)] does not apply to living accommodation provided for an employee if—

(a) it is provided for the better performance of the duties of the employment, and

(b) the employment is one of the kinds of employment in the case of which it is customary for employers to provide living accommodation for employees.

(3) But if the accommodation is provided by a company and the employee (“E”) is a director of the company or of an associated company, the exception in subsection (1) or (2) only applies if, in the case of each company of which E is a director—

(a) E has no material interest in the company, and

(b) either—

(i) E’s employment is as a full-time working director, or

(ii) the company is non-profit-making or is [F48 a charitable company].

(4) “Non-profit-making” means that the company does not carry on a trade and its functions do not consist wholly or mainly in the holding of investments or other property.

(5) A company is “associated” with another if—

(a) one has control of the other, or

(b) both are under the control of the same person.

Textual Amendments

F46 Words in s. 99(1) substituted (with effect in accordance with Sch. 2 para. 62 of the amending Act) by Finance Act 2017 (c. 10), Sch. 2 para. 9(2)

F47 Words in s. 99(2) substituted (with effect in accordance with Sch. 2 para. 62 of the amending Act) by Finance Act 2017 (c. 10), Sch. 2 para. 9(3)

F48 Words in s. 99(3)(b)(ii) substituted (coming into force for the tax year 2012-13 and subsequent tax years) by Finance Act 2010 (c. 13), Sch. 6 paras. 17(2), 34(2); S.I. 2012/736, art. 13

100 Accommodation provided as result of security threat U.K.

[F49 In 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) there is a special threat to the security of the employee,

(b) special security arrangements are in force, and

(c) the employee resides in the accommodation as part of those arrangements.

Textual Amendments

F49 Words in s. 100 substituted (with effect in accordance with Sch. 2 para. 62 of the amending Act) by Finance Act 2017 (c. 10), Sch. 2 para. 10

[F50 100A Homes outside UK owned through company etc U.K.

(1) [F51 In 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 outside the United Kingdom provided by a company for a director or other officer of the company (“D”) or a member of D's family or household if—

(a) the company is wholly owned by D or D and other individuals (and no interest in the company is partnership property), and

(b) the company has been the holding company of the property at all times after the relevant time.

(2) The company is “the holding company of the property” when—

(a) it owns a relevant interest in the property,

(b) its main or only asset is that interest, and

(c) the only activities undertaken by it are ones that are incidental to its ownership of that interest.

(3) The company is also “the holding company of the property” when—

(a) a company (“the subsidiary”) which is wholly owned by the company meets the conditions in paragraphs (a) to (c) of subsection (2),

(b) the company's main or only asset is its interest in the subsidiary, and

(c) the only activities undertaken by the company are ones that are incidental to its ownership of that interest.

(4) “Relevant interest in the property” means an interest under the law of any territory that confers (or would but for any inferior interest confer) a right to exclusive possession of the property at all times or at certain times.

(5) “The relevant time” is the time the company first owned a relevant interest in the property; but this is subject to subsection (6).

(6) If—

(a) none of D's interest in the company was acquired directly or indirectly from a person connected with D, and

(b) the company owned a relevant interest in the property at the time D first acquired an interest in the company,

“the relevant time” is the time D first acquired such an interest.

Textual Amendments

F50 Ss. 100A,100B inserted (retrospectively) by Finance Act 2008 (c. 9), s. 45

F51 Words in s. 100A(1) substituted (with effect in accordance with Sch. 2 para. 62 of the amending Act) by Finance Act 2017 (c. 10), Sch. 2 para. 11

100B Section 100A(1): exceptions U.K.

(1) Section 100A(1) does not apply if subsection (2), (3) or (4) applies.

(2) This subsection applies if—

(a) the company's interest in the property was acquired directly or indirectly from a connected company at an undervalue, or

(b) the company's interest in the property derives from an interest that was so acquired.

(3) This subsection applies if, at any time after the relevant time—

(a) expenditure in respect of the property has been incurred directly or indirectly by a connected company, or

(b) any borrowing of the company directly or indirectly from a connected company has been outstanding (but see subsection (7)).

(4) This subsection applies if the living accommodation is provided in pursuance of an arrangement the main purpose, or one of the main purposes, of which is the avoidance of tax or national insurance contributions.

(5) In subsection (2) references to the acquisition of an interest include the grant of an interest.

(6) For the purposes of that subsection, an interest is acquired at an undervalue if the total consideration for it is less than that which might reasonably have been expected to be obtained on a disposal of the interest on the open market; and “consideration” here means consideration provided at any time (and, for example, includes payments by way of rent).

(7) For the purposes of subsection (3)(b), no account is to be taken of—

(a) any borrowing at a commercial rate, or

(b) any borrowing which results in D being treated under Chapter 7 (taxable benefits: loans) as receiving earnings.

(8) In subsection (4) “arrangement” includes any scheme, agreement or understanding, whether or not enforceable.

(9) In this section “connected company” means—

(a) a company connected with D, with a member of D's family or with an employer of D, or

(b) a company connected with such a company.]

Textual Amendments

F50 Ss. 100A,100B inserted (retrospectively) by Finance Act 2008 (c. 9), s. 45

101 Chevening House U.K.

[F52 In 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 the accommodation is—

(a) Chevening House, or

(b) any other premises held on the trusts of the trust instrument set out in the Schedule to the Chevening Estate Act 1959 (c. 49),

and the employee is a person nominated in accordance with those trusts.

Textual Amendments

F52 Words in s. 101 substituted (with effect in accordance with Sch. 2 para. 62 of the amending Act) by Finance Act 2017 (c. 10), Sch. 2 para. 12

Benefit of living accommodation treated as earnings U.K.

102 Benefit of living accommodation treated as earnings U.K.

(1) [F53 This section applies if living accommodation to which this Chapter applies is provided in any period (“the taxable period”) — ]

(a) which consists of the whole or part of a tax year, and

(b) throughout which the employee holds the employment,

[F54 (1A) the cash equivalent of the benefit of the accommodation is to be treated as earnings from the employment for that year.]

[F55 (1B) If the benefit of the accommodation is provided pursuant to optional remuneration arrangements—

(a) subsection (1A) does not apply, and

(b) the relevant amount is to be treated as earnings from the employment for that tax year.]

F56 (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3) Section 103 indicates how the cash equivalent is calculated.

[F57 (4) Section 103A indicates how the relevant amount is determined.]

Textual Amendments

F53 Words in s. 102(1) substituted (with effect in accordance with Sch. 2 para. 62 of the amending Act) by Finance Act 2017 (c. 10), Sch. 2 para. 13(2)

F54 Words in s. 102(1) renumbered as s. 102(1A) (with effect in accordance with Sch. 2 para. 62 of the amending Act) by Finance Act 2017 (c. 10), Sch. 2 para. 13(3)

F55 S. 102(1B) inserted (with effect in accordance with Sch. 2 para. 62 of the amending Act) by Finance Act 2017 (c. 10), Sch. 2 para. 13(4)

F56 S. 102(2) omitted (with effect in accordance with Sch. 2 para. 62 of the amending Act) by virtue of Finance Act 2017 (c. 10), Sch. 2 para. 13(5)

F57 S. 102(4) inserted (with effect in accordance with Sch. 2 para. 62 of the amending Act) by Finance Act 2017 (c. 10), Sch. 2 para. 13(6)

Calculation of cash equivalent U.K.

103 Method of calculating cash equivalent U.K.

(1) The cash equivalent is calculated—

(a) under section 105 if the cost of providing the living accommodation does not exceed £75,000; and

(b) under section 106 if the cost of providing the living accommodation exceeds £75,000.

(2) Section 104 (general rule) sets out how to calculate the cost of providing living accommodation for the purpose of determining whether or not it exceeds £75,000.

(3) In this Chapter—

• “annual value”,

• “person involved in providing accommodation”, and

• “the property”,

• have the meaning given by sections 110 to 113, and “the taxable period” has the meaning given by section [F58 102(1)] .

Textual Amendments

F58 Word in s. 103(3) substituted (with effect in accordance with Sch. 2 para. 62 of the amending Act) by Finance Act 2017 (c. 10), Sch. 2 para. 14

[F59 103A Accommodation provided pursuant to optional remuneration arrangements: relevant amount U.K.

(1) To find the relevant amount, first determine which (if any) is the greater of—

(a) the modified cash equivalent of the benefit of the accommodation (see sections 105(2A) and 106(2A)), and

(b) the amount foregone with respect to the benefit of the accommodation (see section 69B).

(2) If the amount mentioned in subsection (1)(a) is greater than or equal to the amount mentioned in subsection (1)(b), the “relevant amount” is the cash equivalent of the benefit of the accommodation (see section 103).

(3) Otherwise, the “relevant amount” is the difference between—

(a) the amount foregone with respect to the benefit of the accommodation, and

(b) the deductible amount (see subsections (7) and (8)).

(4) If the amount foregone with respect to the benefit of the accommodation does not exceed the deductible amount, the relevant amount is taken to be zero.

(5) For the purposes of subsections (1) and (2), assume that the modified cash equivalent of the benefit of the accommodation is zero if the condition in subsection (6) is met.

(6) 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).]

Textual Amendments

F59 S. 103A inserted (with effect in accordance with Sch. 2 para. 62 of the amending Act) by Finance Act 2017 (c. 10), Sch. 2 para. 15

104 General rule for calculating cost of providing accommodation U.K.

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

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.

Accommodation costing £75,000 or less U.K.

105 Cash equivalent: cost of accommodation not over £75,000 U.K.

(1) The cash equivalent [F60 or modified cash equivalent] is to be calculated under this section if the cost of providing the living accommodation does not exceed £75,000.

(2) The cash equivalent is the difference between—

(a) the rental value of the accommodation for the taxable period, and

(b) any sum made good [F61 , 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.

[F62 (2A) The modified cash equivalent is equal to the rental value of the accommodation for the taxable period.]

(3) The “rental value of the accommodation” for the taxable period is [F63 (subject to subsections (4) and (4A))] the rent which would have been payable for that period if the property had been let to the employee at an annual rent equal to the annual value.

[F64 (4) Subsection (4A) applies where—

(a) a rental amount is payable by the person (“P”) at whose cost the accommodation is provided in respect of the whole or part of the taxable period (“the relevant period”), and

(b) the amount so payable is payable at an annual rate greater than the annual value.

(4A) Where this subsection applies—

(a) subsection (3) does not apply to the relevant period, and

(b) instead the “rental value of the accommodation” for the relevant period is the rental amount payable by P in respect of the relevant period.

(4B) A reference in subsection (4) or (4A) to a rental amount payable by P in respect of the relevant period is to the sum of—

(a) any rent for the period payable by P, and

(b) any amount attributed to the period in respect of a lease premium (see sections 105A and 105B).]

(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.

Textual Amendments

F60 Words in s. 105(1) inserted (with effect in accordance with Sch. 2 para. 62 of the amending Act) by Finance Act 2017 (c. 10), Sch. 2 para. 16(2)

F61 Words in s. 105(2)(b) inserted (with effect in accordance with s. 1(14) of the amending Act) by Finance (No. 2) Act 2017 (c. 32), s. 1(5)

F62 S. 105(2A) inserted (with effect in accordance with Sch. 2 para. 62 of the amending Act) by Finance Act 2017 (c. 10), Sch. 2 para. 16(3)

F63 Words in s. 105(3) inserted (with effect in accordance with s. 71(4)-(6) of the amending Act) by Finance Act 2009 (c. 10), s. 71(2)(a)

F64 S. 105(4)-(4B) substituted for s. 105(4) (with effect in accordance with s. 71(4)-(6) of the amending Act) by Finance Act 2009 (c. 10), s. 71(2)(b)

[F65 105A Lease premiums U.K.

(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.

Textual Amendments

F65 Ss. 105A, 105B inserted (with effect in accordance with s. 71(4)-(6) of the amending Act) by Finance Act 2009 (c. 10), s. 71(3)

105B Lease premiums in the case of leases with break clauses U.K.

(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) the net amount payable by P in relation to the lease by way of lease premium,

are to be determined on the assumption that any relevant break clause is exercised in such a way that the term of the lease is as short as possible.

(4) If a relevant break clause is not in fact exercised in such a way that the term of the original lease is as short as possible, the parties to the lease are treated for the purposes of section 105A as if they were parties to another lease (a “notional lease”) the term of which—

(a) begins immediately after the time at which the term of the original lease would have ended, if that break clause had been so exercised, and

(b) ends at the time mentioned in subsection (5).

(5) The term of a notional lease ends—

(a) at the time the term of the original lease would end, on the assumption that any relevant break clause that is exercisable only after the beginning of the term of the notional lease is exercised in such a way that the term of the original lease is as short as possible, or

(b) if earlier, the tenth anniversary of the beginning of the term of the original lease.

(6) For the purposes of section 105A the net amount payable by P in relation to a notional lease by way of lease premium is, in the case of a notional lease the term of which ends under paragraph (a) of subsection (5)—

(a) the net amount that would be payable by P in relation to the original lease by way of lease premium on the assumption mentioned in that paragraph, 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).

(7) For the purposes of section 105A the net amount payable by P in relation to a notional lease by way of lease premium is, in the case of a notional lease the term of which ends under paragraph (b) of subsection (5), the relevant proportion of—

(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.]

Textual Amendments

F65 Ss. 105A, 105B inserted (with effect in accordance with s. 71(4)-(6) of the amending Act) by Finance Act 2009 (c. 10), s. 71(3)

Accommodation costing more than £75,000 U.K.

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

(1) The cash equivalent [F66 or 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”)—

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

Calculate the rent which would have been payable for the taxable period if the property had been let to the employee at the additional yearly rent calculated under step 2.

Step 4

Calculate the cash equivalent by—

(a) adding together the amounts calculated under steps 1 and 3, and

(b) (if allowed by subsection (3)) subtracting from that total the excess rent paid by the employee.

[F67 (2A) To calculate the modified cash equivalent—

(a) apply steps 1 to 3 in subsection (2), as if the words “cash equivalent” in step 1 were “modified cash equivalent (for the purposes of section 105)”;

(b) calculate the modified cash equivalent by adding together the amounts calculated under steps 1 and 3 as applied by paragraph (a).]

(3) In step 4—

(a) paragraph (b) only applies if, in respect of the taxable period, the rent [F68 paid—

(i) by the employee,

(ii) in respect of the accommodation,

(iii) to the person providing it, and

(iv) 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.

Textual Amendments

F66 Words in s. 106(1) inserted (with effect in accordance with Sch. 2 para. 62 of the amending Act) by Finance Act 2017 (c. 10), Sch. 2 para. 17(2)

F67 S. 106(2A) inserted (with effect in accordance with Sch. 2 para. 62 of the amending Act) by Finance Act 2017 (c. 10), Sch. 2 para. 17(3)

F68 Words in s. 106(3)(a) substituted (with effect in accordance with s. 1(14) of the amending Act) by Finance (No. 2) Act 2017 (c. 32), s. 1(6)

107 Special rule for calculating cost of providing accommodation U.K.

(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—

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 U.K.

108 Cash equivalent: accommodation provided for more than one employee U.K.

(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 U.K.

109 Priority of this Chapter over Chapter 1 of this Part U.K.

(1) This section applies if—

(a) under this Chapter [F69 an amount] is to be treated as earnings from an employee’s employment for a tax year, and

(b) under Chapter 1 of this Part an amount would, apart from this section, constitute earnings from the employment for the year in respect of the provision of the accommodation.

(2) The full amount [F70 mentioned in subsection (1)(a)] is to be treated as earnings from the employment for that year under this Chapter.

(3) The amount mentioned in subsection (1)(b) is to constitute earnings from the employment for the year under Chapter 1 of this Part only to the extent that it exceeds the amount mentioned in subsection (2).

[F71 (4) In a case where the [F72 amount mentioned in subsection (1)(a)] is nil—

(a) subsections (2) and (3) do not apply, and

(b) the full amount mentioned in subsection (1)(b) constitutes earnings from the employment for the year under Chapter 1.]

Textual Amendments

F69 Words in s. 109(1)(a) substituted (with effect in accordance with Sch. 2 para. 62 of the amending Act) by Finance Act 2017 (c. 10), Sch. 2 para. 18(2)

F70 Words in s. 109(2) substituted (with effect in accordance with Sch. 2 para. 62 of the amending Act) by Finance Act 2017 (c. 10), Sch. 2 para. 18(3)

F71 S. 109(4) inserted (with effect in accordance with s. 7(9) of the amending Act) by Finance Act 2016 (c. 24), s. 7(3)

F72 Words in s. 109(4) substituted (with effect in accordance with Sch. 2 para. 62 of the amending Act) by Finance Act 2017 (c. 10), Sch. 2 para. 18(4)

Supplementary U.K.

110 Meaning of “annual value” U.K.

(1) For the purposes of this Chapter the “annual value” of living accommodation 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

(b) the landlord undertook to bear the costs of the repairs and insurance and the other expenses (if any) necessary for maintaining the property in a state to command that 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 so obtained in respect of the letting of the accommodation, 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 living accommodation is of a kind that might reasonably be expected to be let on terms 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 accommodation but belong to or are occupied by the 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 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.

111 Disputes as to annual value U.K.

(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.

F73 (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F74 (3) 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.]

Textual Amendments

F73 S. 111(2) omitted (1.4.2009) by virtue of The Transfer of Tribunal Functions and Revenue and Customs Appeals Order 2009 (S.I. 2009/56), art. 1(2), Sch. 1 para. 336(2)

F74 S. 111(3) substituted (1.4.2009) by The Transfer of Tribunal Functions and Revenue and Customs Appeals Order 2009 (S.I. 2009/56), art. 1(2), Sch. 1 para. 336(3)

112 Meaning of “person involved in providing the accommodation” U.K.

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).

113 Meaning of “the property” U.K.

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

Chapter 6 U.K. Taxable benefits: cars, vans and related benefits

General U.K.

114 Cars, vans and related benefits U.K.

(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).

[F75 (1A) 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 [F76 an amount in respect of] the benefit of the car to be treated as earnings,

(b) sections 149 to 153 provide for [F77 an amount in respect of] the benefit of any fuel provided for the car to be treated as earnings, F78 ...

(c) sections 154 to [F79 159] provide for [F80 an amount in respect of] the benefit of the van to be treated as earnings[F81 ; and

(d) sections 160 to 164 provide for [F82 an amount in respect of] the benefit of any fuel provided for the van to be treated as earnings in certain circumstances.]

F83 (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F84 (3A) 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).

• [F85 section 169A (van available to more than one member of family or household employed by same employer).]

Textual Amendments

F75 S. 114(1A) inserted (with effect in accordance with s. 7(9) of the amending Act) by Finance Act 2016 (c. 24), s. 7(4)

F76 Words in s. 114(2)(a) substituted (with effect in accordance with Sch. 2 para. 62 of the amending Act) by Finance Act 2017 (c. 10), Sch. 2 para. 19(a)

F77 Words in s. 114(2)(b) substituted (with effect in accordance with Sch. 2 para. 62 of the amending Act) by Finance Act 2017 (c. 10), Sch. 2 para. 19(b)

F78 Word in s. 114(2)(b) repealed (22.7.2004) by Finance Act 2004 (c. 12), Sch. 42 Pt. 2(9)

F79 Word in s. 114(2)(c) substituted (with effect in accordance with s. 80(2) of the amending Act) by Finance Act 2004 (c. 12), Sch. 14 para. 2(2)

F80 Words in s. 114(2)(c) substituted (with effect in accordance with Sch. 2 para. 62 of the amending Act) by Finance Act 2017 (c. 10), Sch. 2 para. 19(c)

F81 S. 114(2)(d) and preceding word inserted (with effect in accordance with s. 80(2) of the amending Act) by Finance Act 2004 (c. 12), Sch. 14 para. 2(2)

F82 Words in s. 114(2)(d) substituted (with effect in accordance with Sch. 2 para. 62 of the amending Act) by Finance Act 2017 (c. 10), Sch. 2 para. 19(d)

F83 S. 114(3) omitted (with effect in accordance with s. 23(2) of the amending Act) by virtue of Finance Act 2014 (c. 26), s. 23(1)

F84 S. 114(3A) inserted (with effect in accordance with s. 80(2) of the amending Act) by Finance Act 2004 (c. 12), Sch. 14 para. 2(3)

F85 Words in s. 114(4) inserted (with effect in accordance with s. 80(2) of the amending Act) by Finance Act 2004 (c. 12), Sch. 14 para. 2(4)

115 Meaning of “car” and “van” U.K.

(1) In this Chapter—

• “car” means a mechanically propelled road vehicle which is not—

  (a)

  a goods vehicle,

  (b)

  a motor cycle,

  (c)

  an invalid carriage, or

  (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—

  (a)

  is a goods vehicle, and

  (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.

116 Meaning of when car or van is available to employee U.K.

(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 [F86 or van] is first made available to an employee are to the earliest time when the car [F86 or van] is made available as mentioned in subsection (1), and

(b) the last day in a year on which a car [F86 or van] is available to an employee are to the last day in the year on which the car [F86 or van] is made available as mentioned in subsection (1).

(3) This section does not apply to section [F87 124A or] 138 (automatic car [F86 or van] for a disabled employee).

Textual Amendments

F86 Words in s. 116(2) inserted (22.7.2004) by Finance Act 2004 (c. 12), Sch. 14 para. 3

F87 Words in s. 116(3) inserted (with effect in accordance with s. 54(6) of the amending Act) by Finance Act 2009 (c. 10), s. 54(2)

[F88 117 Meaning of car or van made available by reason of employment U.K.

(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) the car or van in question is made available in the normal course of the employer's domestic, family or personal relationships.

(3) Subsection (1) does not apply where—

(a) the employer carries on a vehicle hire business under which cars or vans of the same kind are made available to members of the public for hire,

(b) the car or van in question is hired to the employee or member in the normal course of that business, and

(c) in hiring that car or van the employee or member is acting as an ordinary member of the public.]

Textual Amendments

F88 S. 117 substituted (with effect in accordance with s. 7(9) of the amending Act) by Finance Act 2016 (c. 24), s. 7(5)

118 Availability for private use U.K.

(1) For the purposes of this Chapter a car or van made available in a tax year to an employee or a member of the employee’s family or household is to be treated as available for the employee’s or member’s private use unless in that year—

(a) the terms on which it is made available prohibit such use, and

(b) it is not so used.

(2) In this Chapter “private use”, in relation to a car or van made available to an employee or a member of the employee’s family or household, means any use other than for the employee’s business travel (see section 171(1)).

119 Where alternative to benefit of [F89 low emission] car [F90 or van] offered U.K.

[F91 (1) This section applies where in a tax year—

(a) a car is made available as mentioned in section 114(1),

(b) the car's CO₂ emissions figure (see sections 133 to 138) does not exceed 75 grams per kilometre, and

(c) an alternative to the benefit of the car is offered.]

(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).

Textual Amendments

F89 Words in s. 119 heading inserted (with effect in accordance with Sch. 2 para. 62 of the amending Act) by Finance Act 2017 (c. 10), Sch. 2 para. 20(3)

F90 Words in s. 119 inserted (22.7.2004) by Finance Act 2004 (c. 12), Sch. 14 para. 4

F91 S. 119(1) substituted (with effect in accordance with Sch. 2 para. 62 of the amending Act) by Finance Act 2017 (c. 10), Sch. 2 para. 20(2)

Cars: benefit treated as earnings U.K.

120 Benefit of car treated as earnings U.K.

(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 [F92 (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.

[F93 (3) 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.]

[F94 (4) This section is subject to section 120A.]

Textual Amendments

F92 Words in s. 120(2) inserted (with effect in accordance with s. 7(9) of the amending Act) by Finance Act 2016 (c. 24), s. 7(6)(a)

F93 S. 120(3) inserted (with effect in accordance with s. 7(9) of the amending Act) by Finance Act 2016 (c. 24), s. 7(6)(b)

F94 S. 120(4) inserted (with effect in accordance with Sch. 2 para. 62 of the amending Act) by Finance Act 2017 (c. 10), Sch. 2 para. 21

[F95 120A Benefit of car treated as earnings: optional remuneration arrangements U.K.

(1) Where this Chapter applies to a car in relation to a particular tax year and the conditions in subsection (3) are met—

(a) the relevant amount (see section 121A) is to be treated as earnings from the employment for that tax year, and

(b) section 120(1) does not apply.

(2) 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 car in the tax year.

(3) The conditions are that—

(a) the car is made available to the employee or member of the employee's household pursuant to optional remuneration arrangements,

(b) [F96 the total foregone amount in connection with the car for the tax year is] is greater than the modified cash equivalent of the benefit of the car for the tax year (see section 121B), and

(c) the car's CO₂ emissions figure (see sections 133 to 138) exceeds 75 grams per kilometre.

[F97 (4) In this section, and in section 121A, the total foregone amount in connection with the car for a tax year is the total of—

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

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

(i) 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.]]

Textual Amendments

F95 S. 120A inserted (with effect in accordance with Sch. 2 para. 62 of the amending Act) by Finance Act 2017 (c. 10), Sch. 2 para. 22

F96 Words in s. 120A(3)(b) substituted (with effect in accordance with s. 7(7) of the amending Act) by Finance Act 2019 (c. 1), s. 7(2)(a)

F97 S. 120A(4) inserted (with effect in accordance with s. 7(7) of the amending Act) by Finance Act 2019 (c. 1), s. 7(2)(b)

121 Method of calculating the cash equivalent of the benefit of a car U.K.

(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 [F98 124A].

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. [F99 The resulting amount is the interim sum.]

Step 4

F100 ...

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).

[F101 (3) Where the car is shared the cash equivalent is calculated under this section in accordance with section 148.]

Textual Amendments

F98 Word in s. 121(1) substituted (with effect in accordance with s. 54(6) of the amending Act) by Finance Act 2009 (c. 10), s. 54(3)

F99 Words in s. 121(1) inserted (with effect in accordance with Sch. 28 para. 10(2) of the amending Act) by Finance Act 2009 (c. 10), Sch. 28 para. 2(2)

F100 Words in s. 121(1) omitted (with effect in accordance with Sch. 28 para. 10(2) of the amending Act) by virtue of Finance Act 2009 (c. 10), Sch. 28 para. 2(3)

F101 S. 121(3) substituted (1.3.2012) by The Enactment of Extra-Statutory Concessions Order 2012 (S.I. 2012/266), arts. 1, 3(2)

[F102 121A Optional remuneration arrangements: method of calculating relevant amount U.K.

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

• [F103 Step 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 [F104 “total foregone amount” for the purposes of] step 1 of subsection (1), to apportion an amount of earnings to [F105 a 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).

Textual Amendments

F102 Ss. 121A, 121B inserted (with effect in accordance with Sch. 2 para. 62 of the amending Act) by Finance Act 2017 (c. 10), Sch. 2 para. 23

F103 Words in s. 121A(1) substituted (with effect in accordance with s. 7(7) of the amending Act) by Finance Act 2019 (c. 1), s. 7(3)(a)

F104 Words in s. 121A(2) substituted (with effect in accordance with s. 7(7) of the amending Act) by Finance Act 2019 (c. 1), s. 7(3)(b)(i)

F105 Words in s. 121A(2) substituted (with effect in accordance with s. 7(7) of the amending Act) by Finance Act 2019 (c. 1), s. 7(3)(b)(ii)

121B Meaning of “modified cash equivalent” U.K.

(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).]

Textual Amendments

F102 Ss. 121A, 121B inserted (with effect in accordance with Sch. 2 para. 62 of the amending Act) by Finance Act 2017 (c. 10), Sch. 2 para. 23

Cars: the price of a car U.K.

122 The price of the car U.K.

[F106 (1) 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.]

[F107 (2) This is subject to section 124A (automatic car for a disabled employee).]

Textual Amendments

F106 S. 122 renumbered as s. 122(1) (with effect in accordance with s. 54(6) of the amending Act) by Finance Act 2009 (c. 10), s. 54(4)

F107 S. 122(2) inserted (with effect in accordance with s. 54(6) of the amending Act) by Finance Act 2009 (c. 10), s. 54(4)

123 The list price of a car U.K.

(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)).

Modifications etc. (not altering text)

C1 S. 123 applied (with modifications) by 1994 c. 22, s. 1GF(3)(4) (as inserted (18.11.2015) by Finance (No. 2) Act 2015 (c. 33), s. 46(2)(c))

124 The notional price of a car with no list price U.K.

(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.

Modifications etc. (not altering text)

C2 S. 124 applied (with modifications) by 1994 c. 22, s. 1GF(3)(4) (as inserted (18.11.2015) by Finance (No. 2) Act 2015 (c. 33), s. 46(2)(c))

[F108 124A Automatic car for a disabled employee U.K.

(1) This section applies where—

(a) a car has automatic transmission (“the automatic car”),

(b) at any time in the year when the automatic car is available to the employee (“E”), E holds a disabled person's badge, and

(c) by reason of E's disability, E must, in the event of wanting to drive a car, drive a car which has automatic transmission.

(2) If, under section 122 to 124, the price of the automatic car is more than it would have been if the automatic car had been an equivalent manual car, the price of the automatic car is to be the price of an equivalent manual car.

(3) In subsection (2) “an equivalent manual car” means a car which—

(a) is first registered at or about the same time as the automatic car, and

(b) does not have automatic transmission, but otherwise is the closest variant available of the make and model of the automatic car.

(4) For the purposes of this section a car has automatic transmission if—

(a) the driver of the car is not provided with any means by which the driver may vary the gear ratio between the engine and the road wheels independently of the accelerator and the brakes, or

(b) the driver is provided with such means, but they do not include—

(i) a clutch pedal, or

(ii) a lever which the driver may operate manually.

(5) For the purposes of this section a car 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.]

Textual Amendments

F108 S. 124A inserted (with effect in accordance with s. 54(6) of the amending Act) by Finance Act 2009 (c. 10), s. 54(5)

Cars: treatment of accessories U.K.

125 Meaning of “accessory” and related terms U.K.

(1) In this Chapter “qualifying accessory” means an accessory which—

(a) is made available for use with the car without any transfer of the property in the accessory,

(b) is made available by reason of the employment, and

(c) is attached to the car (whether permanently or not).

(2) For the purposes of this Chapter “accessory” includes any kind of equipment but does not include—

(a) equipment necessarily provided for use in the performance of the duties of the employment;

(b) equipment by means of which a car is capable of running on road fuel gas;

(c) equipment to enable a disabled person to use a car (see section 172);

(d) a mobile telephone (within the meaning given in section 319(2)).

(3) But subsection (2)(b) does not apply in relation to a car to which section 137 (different CO₂ emissions figure for bi-fuel cars) applies.

[F109 (3A) Subsection (2) needs to be read with section 125A (security features not to be regarded as accessories).]

(4) In this Chapter—

• “standard accessory” means an accessory equivalent to an accessory assumed to be available with cars of the same kind as the car in question in arriving at the list price, and

• “non-standard accessory” means any other accessory.

Textual Amendments

F109 S. 125(3A) inserted (with effect in accordance with s. 14(5) of the amending Act) by Finance Act 2012 (c. 14), s. 14(2)

Modifications etc. (not altering text)

C3 S. 125 applied (with modifications) by 1994 c. 22, s. 1GF(3)(4) (as inserted (18.11.2015) by Finance (No. 2) Act 2015 (c. 33), s. 46(2)(c))

[F110 125A Security features not to be regarded as accessories U.K.

(1) This section applies where a car made available to an employee has a relevant security feature.

(2) The relevant security feature is not an accessory for the purposes of this Chapter if it is provided in order to meet a threat to the employee's personal physical security which arises wholly or mainly because of the nature of the employee's employment.

(3) In this section “relevant security feature” means—

(a) armour designed to protect the car's occupants from explosions or gunfire,

(b) bullet-resistant glass,

(c) 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).]

Textual Amendments

F110 S. 125A inserted (with effect in accordance with s. 14(5) of the amending Act) by Finance Act 2012 (c. 14), s. 14(3)

126 Amounts taken into account in respect of accessories U.K.

(1) The price of the following accessories is to be taken into account under step 2 of section 121(1) [F111 and step 2 of section 121B(1)] —

(a) in the case of a car with a list price, the price of any initial extra accessory, and

(b) in the case of any car, the price of any later accessory.

(2) In this Chapter an “initial extra accessory” means a qualifying accessory which—

(a) is a non-standard accessory,

(b) is available with the car at the time when it is first made available to the employee, and

(c) if it is an accessory in relation to which there is no published price of the manufacturer, importer or distributor of the car (see section 128), is available with the car in the tax year in question.

(3) In this Chapter a “later accessory” means a qualifying accessory which—

(a) is available with the car in the tax year in question,

(b) was not available with the car at the time when it was first made available to the employee,

(c) was not made available with the car before 1st August 1993, and

(d) has a price of at least £100.

(4) In this section references to the price of an accessory are to—

(a) its list price, if it has one, or

(b) its notional price, if it has no list price.

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

Textual Amendments

F111 Words in s. 126(1) inserted (with effect in accordance with Sch. 2 para. 62 of the amending Act) by Finance Act 2017 (c. 10), Sch. 2 para. 24

127 The list price of an accessory U.K.

(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).

Modifications etc. (not altering text)

C4 Ss. 127-130 applied (with modifications) by 1994 c. 22, s. 1GF(3)(4) (as inserted (18.11.2015) by Finance (No. 2) Act 2015 (c. 33), s. 46(2)(c))

128 Accessory: published price of the car manufacturer etc. U.K.

(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.

Modifications etc. (not altering text)

C4 Ss. 127-130 applied (with modifications) by 1994 c. 22, s. 1GF(3)(4) (as inserted (18.11.2015) by Finance (No. 2) Act 2015 (c. 33), s. 46(2)(c))

129 Accessory: published price of the accessory manufacturer etc. U.K.

(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.

Modifications etc. (not altering text)

C4 Ss. 127-130 applied (with modifications) by 1994 c. 22, s. 1GF(3)(4) (as inserted (18.11.2015) by Finance (No. 2) Act 2015 (c. 33), s. 46(2)(c))

130 The notional price of an accessory U.K.

(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.

Modifications etc. (not altering text)

C4 Ss. 127-130 applied (with modifications) by 1994 c. 22, s. 1GF(3)(4) (as inserted (18.11.2015) by Finance (No. 2) Act 2015 (c. 33), s. 46(2)(c))

131 Replacement accessories U.K.

(1) This section applies [F112 for the purposes of sections 121(1) and 121B(1)] where—

(a) a later accessory is available with the car in the tax year in question,

(b) that accessory (“the new accessory”) replaced another qualifying accessory (“the old accessory”) in that year or an earlier tax year, and

(c) the new accessory is of the same kind as the old accessory.

[F113 (1A) In the application of this section for the purposes of section 121B(1)—

(a) references to the cash equivalent of the benefit of the car for the tax year are to be read as references to the modified cash equivalent of the benefit of the car for the tax year, and

(b) references to step 2 of section 121(1) are to be read as references to step 2 of section 121B(1).]

(2) If the new accessory is not superior to the old accessory, the cash equivalent of the benefit of the car for the tax year is to be calculated under step 2 of section 121(1) as if—

(a) the replacement has not been made, and

(b) the new accessory is a continuation of the old accessory.

(3) If the new accessory is superior to the old accessory and the conditions in subsection (4) are met, the cash equivalent of the benefit of the car for the tax year is to be calculated under step 2 of section 121(1)—

(a) as if the old accessory was not available with the car in that tax year, or

(b) where the price of the old accessory would (apart from this section) be added to the price of the car under step 2 of section 121(1) as an initial extra accessory, as if it was not available with the car at the time when the car was first made available to the employee.

(4) The conditions mentioned in subsection (3) are that—

(a) the old accessory was a non-standard accessory, and

(b) both the old and the new accessory would (apart from this section) be taken into account under step 2 of section 121(1) in calculating the cash equivalent of the benefit of the car for the year.

(5) For the purposes of this section a new accessory is superior to an old accessory if the price of the new accessory exceeds whichever is the greater of—

(a) the price of the old accessory, and

(b) the price of an accessory equivalent to the old accessory at the time immediately before the new accessory is first made available for use with the car.

(6) In this section references to the price of an accessory are to—

(a) its list price, if it has one, or

(b) its notional price, if it has no list price.

Textual Amendments

F112 Words in s. 131(1) inserted (with effect in accordance with Sch. 2 para. 62 of the amending Act) by Finance Act 2017 (c. 10), Sch. 2 para. 25(2)

F113 S. 131(1A) inserted (with effect in accordance with Sch. 2 para. 62 of the amending Act) by Finance Act 2017 (c. 10), Sch. 2 para. 25(3)

Cars: capital contributions by employee U.K.

132 Capital contributions by employee U.K.

(1) This section applies [F114 for the purposes of section 121(1)] if the employee contributes a capital sum to expenditure on the provision of—

(a) the car, or

(b) any qualifying accessory which is taken into account in calculating the cash equivalent of the benefit of the car.

(2) A deduction is to be made from the amount carried forward from step 2 of section 121(1)—

(a) for the tax year in which the contribution is made, and

(b) for all subsequent years in which the employee is chargeable to tax in respect of the car by virtue of section 120.

(3) The amount of the deduction allowed in any tax year is the lesser of—

(a) the total of the capital sums contributed by the employee in that year and any earlier years to expenditure on the provision of—

(i) the car, or

(ii) any qualifying accessory which is taken into account in calculating the cash equivalent of the benefit of the car for the tax year in question, and

(b) £5,000.

Textual Amendments

F114 Words in s. 132(1) inserted (with effect in accordance with Sch. 2 para. 62 of the amending Act) by Finance Act 2017 (c. 10), Sch. 2 para. 26

[F115 132A Capital contributions by employee: optional remuneration arrangements U.K.

(1) This section applies for the purposes of section 121A(1) if the employee contributes a capital sum to expenditure on the provision of—

(a) the car, or

(b) any qualifying accessory which is taken into account in calculating under section 121B the modified cash equivalent of the benefit of the car.

(2) A deduction is to be made from the amount carried forward from step 1 of section 121A(1)—

(a) for the tax year in which the contribution is made, and

(b) for all subsequent tax years in which the employee is chargeable to tax in respect of the car by virtue of section 120A.

[F116 (3) The amount of the deduction allowed in any tax year is found by—

(a) first multiplying the capped amount by the appropriate percentage, and

(b) then multiplying the result by the availability factor.]

(4) 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).

[F117 (4A) 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

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

(4B) For the purposes of subsection (4A), the 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.]

(5) In this section “the capped amount” means the lesser of—

(a) the total of the capital sums contributed by the employee in that year and any earlier years to expenditure on the provision of—

(i) the car, or

(ii) any qualifying accessory which is taken into account in calculating under section 121B the modified cash equivalent of the benefit of the car for the tax year in question, and

(b) £5,000.

(6) This section is modified by section 147A (classic cars: optional remuneration arrangements).]

Textual Amendments

F115 S. 132A inserted (with effect in accordance with Sch. 2 para. 62 of the amending Act) by Finance Act 2017 (c. 10), Sch. 2 para. 27

F116 S. 132A(3) substituted (with effect in accordance with s. 7(7) of the amending Act) by Finance Act 2019 (c. 1), s. 7(4)(a)

F117 S. 132A(4A)(4B) inserted (with effect in accordance with s. 7(7) of the amending Act) by Finance Act 2019 (c. 1), s. 7(4)(b)

Cars: the appropriate percentage U.K.

133 How to determine the “appropriate percentage” U.K.

(1) The “appropriate percentage” for a car for a year depends upon when the car was first registered.

(2) If the car was first registered on or after 1st January 1998, the “appropriate percentage” depends upon whether the car—

(a) is a car with a CO₂ emissions figure (see section 134(1)), [F118 or]

(b) is a car without a CO₂ emissions figure (see section 134(2)), F119 ...

F119 (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

and is determined under sections 139 [F120 and 140].

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

Textual Amendments

F118 Word in s. 133(2)(a) inserted (with effect in accordance with s. 24(17) of the amending Act) by Finance Act 2014 (c. 26), s. 24(2)(a)

F119 S. 133(2)(c) and word omitted (with effect in accordance with s. 24(17) of the amending Act) by virtue of Finance Act 2014 (c. 26), s. 24(2)(b)

F120 Words in s. 133(2) substituted (with effect in accordance with s. 24(17) of the amending Act) by Finance Act 2014 (c. 26), s. 24(2)(c)

Modifications etc. (not altering text)

C5 Ss. 133-142 applied by S.I. 2001/1123, reg. 2 (as amended (6.4.2008) by The Income Tax (Car Benefits) (Reduction of Value of Appropriate Percentage) (Amendment) Regulations 2007 (S.I. 2007/3068), regs. 1, 3)

134 Meaning of car with or without a CO₂ emissions figure U.K.

(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 to which section 136 applies, or

(c) a car first registered on or after 1st January 2000 which is a car to which section 137 (bi-fuel cars) applies.

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

Modifications etc. (not altering text)

C5 Ss. 133-142 applied by S.I. 2001/1123, reg. 2 (as amended (6.4.2008) by The Income Tax (Car Benefits) (Reduction of Value of Appropriate Percentage) (Amendment) Regulations 2007 (S.I. 2007/3068), regs. 1, 3)

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

135 Car with a CO₂ emissions figure: pre-October 1999 registration U.K.

(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).

Modifications etc. (not altering text)

C5 Ss. 133-142 applied by S.I. 2001/1123, reg. 2 (as amended (6.4.2008) by The Income Tax (Car Benefits) (Reduction of Value of Appropriate Percentage) (Amendment) Regulations 2007 (S.I. 2007/3068), regs. 1, 3)

136 Car with a CO₂ emissions figure: post-September 1999 registration U.K.

(1) This section applies to a car first registered on or after 1st October 1999 if it is so registered on the basis of—

(a) an EC certificate of conformity (see section 171(1)), or

(b) 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 unless more than one figure is specified, in which case the car’s CO₂ emissions figure is the figure specified as the CO₂ emissions (combined) figure.

[F121 (2A) For the purpose of determining the car's CO₂ emissions figure, ignore any WLTP (worldwide harmonised light-duty vehicles test procedures) values specified in an EC certificate of conformity.]

(3) [F122 Subsection (2)] is subject to—

(a) section 137 (bi-fuel cars), and

(b) section 138 (automatic car for a disabled employee).

Textual Amendments

F121 S. 136(2A) inserted (with effect in accordance with s. 48(12) of the amending Act) by Finance Act 2018 (c. 3), s. 48(9)(a)

F122 Words in s. 136(3) substituted (with effect in accordance with s. 48(12) of the amending Act) by Finance Act 2018 (c. 3), s. 48(9)(b)

Modifications etc. (not altering text)

C5 Ss. 133-142 applied by S.I. 2001/1123, reg. 2 (as amended (6.4.2008) by The Income Tax (Car Benefits) (Reduction of Value of Appropriate Percentage) (Amendment) Regulations 2007 (S.I. 2007/3068), regs. 1, 3)

137 Car with a CO₂ emissions figure: bi-fuel cars U.K.

(1) This section applies to a car first registered on or after 1st January 2000 if it is so registered on the basis of—

(a) an EC certificate of conformity (see section 171(1)), or

(b) a UK approval certificate (see section 171(1)),

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.

[F123 (2A) For the purpose of determining the car's CO₂ emissions figure, ignore any WLTP (worldwide harmonised light-duty vehicles test procedures) values specified in an EC certificate of conformity.]

(3) [F124 Subsection (2)] is subject to section 138 (automatic car for a disabled employee).

Textual Amendments

F123 S. 137(2A) inserted (with effect in accordance with s. 48(12) of the amending Act) by Finance Act 2018 (c. 3), s. 48(10)(a)

F124 Words in s. 137(3) substituted (with effect in accordance with s. 48(12) of the amending Act) by Finance Act 2018 (c. 3), s. 48(10)(b)

Modifications etc. (not altering text)

C5 Ss. 133-142 applied by S.I. 2001/1123, reg. 2 (as amended (6.4.2008) by The Income Tax (Car Benefits) (Reduction of Value of Appropriate Percentage) (Amendment) Regulations 2007 (S.I. 2007/3068), regs. 1, 3)

138 Car with a CO₂ emissions figure: automatic car for a disabled employee U.K.

(1) This section applies where—

(a) a car with a CO₂ emissions figure has automatic transmission (“the automatic car”),

(b) at any time in the year when the automatic car is available to the employee (“E”), E holds a disabled person’s badge, and

(c) by reason of E’s disability, E must, in the event of wanting to drive a car, drive a car which has automatic transmission.

(2) If, under sections 135 to 137, the automatic car’s CO₂ emissions figure is more than it would have been if the automatic car had been an equivalent manual car, the CO₂ emissions figure for the automatic car is to be the CO₂ emissions figure for an equivalent manual car.

(3) In subsection (2) “an equivalent manual car” means a car which—

(a) is first registered at or about the same time as the automatic car, and

(b) does not have automatic transmission, but otherwise is the closest variant available of the make and model of the automatic car.

(4) For the purposes of this section a car has automatic transmission if—

(a) the driver of the car is not provided with any means by which the driver may vary the gear ratio between the engine and the road wheels independently of the accelerator and the brakes, or

(b) the driver is provided with such means, but they do not include—

(i) a clutch pedal, or

(ii) a lever which the driver may operate manually.

(5) For the purposes of this section a car 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.

Modifications etc. (not altering text)

C5 Ss. 133-142 applied by S.I. 2001/1123, reg. 2 (as amended (6.4.2008) by The Income Tax (Car Benefits) (Reduction of Value of Appropriate Percentage) (Amendment) Regulations 2007 (S.I. 2007/3068), regs. 1, 3)

[F125 139 Cars with a CO₂ emissions figure: the appropriate percentage U.K.

(1) [F126 The 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%

(2) For the purposes of subsection (1) and the table, if a CO₂ emissions figure or an electric range figure is not a whole number, round it down 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.]

(7) This section is subject to—

F127 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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

Textual Amendments

F125 S. 139 substituted (with effect in accordance with s. 59(5) of the amending Act) by Finance Act 2010 (c. 13), s. 59(2)

F126 S. 139(1)-(5) substituted for s. 139(1)-(6) (with effect in accordance with s. 2(6) of the amending Act) by Finance (No. 2) Act 2017 (c. 32), s. 2(2)

F127 S. 139(7)(a) and word omitted (with effect in accordance with s. 24(17) of the amending Act) by virtue of Finance Act 2014 (c. 26), s. 24(6) and word in s. 139(7)(a) inserted (with effect in accordance with s. 9(6) of the amending Act) by Finance Act 2018 (c. 3), s. 9(5)

Modifications etc. (not altering text)

C5 Ss. 133-142 applied by S.I. 2001/1123, reg. 2 (as amended (6.4.2008) by The Income Tax (Car Benefits) (Reduction of Value of Appropriate Percentage) (Amendment) Regulations 2007 (S.I. 2007/3068), regs. 1, 3)

140 Car without a CO₂ emissions figure: the appropriate percentage U.K.

(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	[F128 24%]
More than 1,400 but not more than 2,000	[F129 35%]
More than 2,000	[F130 37%]

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—

[F131 [F132 (a) [F133 [F134 9%]] [F135 [F133 13%]] [F136 [F135 16%]] [F136 2%] if the car cannot in any circumstances emit CO2 by being driven, and]

(b) [F137 37%] in any other case.]

F138 (3A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F139 (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(5) This section is subject to—

F140 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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

Textual Amendments

F128 Word in s. 140(2) Table substituted (with effect in accordance with s. 2(6) of the amending Act) by Finance (No. 2) Act 2017 (c. 32), s. 2(3)(a)(i)

F129 Word in s. 140(2) Table substituted (with effect in accordance with s. 2(6) of the amending Act) by Finance (No. 2) Act 2017 (c. 32), s. 2(3)(a)(ii)

F130 Word in s. 140(2) Table substituted (with effect in accordance with s. 23(12) of the amending Act) by Finance Act 2013 (c. 29), s. 23(8)

F131 S. 140(3)(a)(b) substituted for words (with effect for the tax year 2010-11 and subsequent tax years in accordance with s. 58(18) of the amending Act) by Finance Act 2010 (c. 13), s. 58(8)

F132 S. 140(3)(a) substituted (with effect in accordance with s. 23(12) of the amending Act) by Finance Act 2013 (c. 29), s. 23(9)(a)

F133 Word in s. 140(3)(a) substituted (with effect in accordance with s. 9(4) of the amending Act) by Finance Act 2016 (c. 24), s. 9(3)

F134 Word in s. 140(3)(a) substituted (with effect in accordance with s. 9(2) of the amending Act) by Finance Act 2016 (c. 24), s. 9(1)

F135 Word in s. 140(3)(a) substituted (with effect in accordance with s. 8(9) of the amending Act) by Finance Act 2016 (c. 24), s. 8(7)

F136 Word in s. 140(3)(a) substituted (with effect in accordance with s. 2(6) of the amending Act) by Finance (No. 2) Act 2017 (c. 32), s. 2(3)(b)

F137 Word in s. 140(3)(b) substituted (with effect in accordance with s. 23(12) of the amending Act) by Finance Act 2013 (c. 29), s. 23(10)

F138 S. 140(3A) omitted (with effect in accordance with s. 23(12) of the amending Act) by virtue of Finance Act 2013 (c. 29), s. 23(10)

F139 S. 140(4) omitted (with effect for the tax year 2010-11 and subsequent tax years in accordance with s. 58(18) of the amending Act) by virtue of Finance Act 2010 (c. 13), s. 58(10)

F140 S. 140(5)(a) and word omitted (with effect in accordance with s. 24(17) of the amending Act) by virtue of Finance Act 2014 (c. 26), s. 24(10) and word in s. 140(5)(a) inserted (with effect in accordance with s. 9(6) of the amending Act) by Finance Act 2018 (c. 3), s. 9(5)

Modifications etc. (not altering text)

C5 Ss. 133-142 applied by S.I. 2001/1123, reg. 2 (as amended (6.4.2008) by The Income Tax (Car Benefits) (Reduction of Value of Appropriate Percentage) (Amendment) Regulations 2007 (S.I. 2007/3068), regs. 1, 3)

F141 141 Diesel cars: the appropriate percentage U.K.

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

Textual Amendments

F141 S. 141 omitted (with effect in accordance with s. 24(17) of the amending Act) by virtue of Finance Act 2014 (c. 26), s. 24(11); word in s. 141(2) substituted (with effect in accordance with s. 9(2) of the amending Act) by Finance Act 2015 (c. 11), s. 9(1); s. 141(1)(1A) substituted for s. 141(1) (with effect in accordance with s. 9(6) of the amending Act) by Finance Act 2018 (c. 3), s. 9(2); s. 141(2A) inserted (with effect in accordance with s. 9(6) of the amending Act) by Finance Act 2018 (c. 3), s. 9(4); word in s. 141(2) substituted (with effect in accordance with s. 9(6) of the amending Act) by Finance Act 2018 (c. 3), s. 9(3)(a); words in s. 141(2) substituted (with effect in accordance with s. 9(6) of the amending Act) by Finance Act 2018 (c. 3), s. 9(3)(b)

Modifications etc. (not altering text)

C5 Ss. 133-142 applied by S.I. 2001/1123, reg. 2 (as amended (6.4.2008) by The Income Tax (Car Benefits) (Reduction of Value of Appropriate Percentage) (Amendment) Regulations 2007 (S.I. 2007/3068), regs. 1, 3)

Cars: appropriate percentage: first registered before 1st January 1998 U.K.

142 Car first registered before 1st January 1998: the appropriate percentage U.K.

(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	[F142 24%]
More than 1,400 but not more than 2,000	[F143 35%]
More than 2,000	[F144 37%]

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 [F145 37%].

F146 (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F142 Word in s. 142(2) Table substituted (with effect in accordance with s. 2(6) of the amending Act) by Finance (No. 2) Act 2017 (c. 32), s. 2(4)(a)

F143 Word in s. 142(2) Table substituted (with effect in accordance with s. 2(6) of the amending Act) by Finance (No. 2) Act 2017 (c. 32), s. 2(4)(b)

F144 Word in s. 142(2) Table substituted (with effect in accordance with s. 24(17) of the amending Act) by Finance Act 2014 (c. 26), s. 24(13)(c)

F145 Word in s. 142(3) substituted (with effect in accordance with s. 24(17) of the amending Act) by Finance Act 2014 (c. 26), s. 24(14)

F146 S. 142(4) omitted (with effect in accordance with Sch. 28 para. 10(2) of the amending Act and with Finance Act 2010 (c. 13), s. 58(20)) by virtue of Finance Act 2009 (c. 10), Sch. 28 para. 8(b)

Modifications etc. (not altering text)

C5 Ss. 133-142 applied by S.I. 2001/1123, reg. 2 (as amended (6.4.2008) by The Income Tax (Car Benefits) (Reduction of Value of Appropriate Percentage) (Amendment) Regulations 2007 (S.I. 2007/3068), regs. 1, 3)

Cars: unavailability or payments for private use U.K.

143 Deduction for periods when car unavailable U.K.

[F147 (A1) 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) [F148 or (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—

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 [F149 of 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).

Textual Amendments

F147 S. 143(A1) inserted (with effect in accordance with Sch. 2 para. 62 of the amending Act) by Finance Act 2017 (c. 10), Sch. 2 para. 28(2)

F148 Words in s. 143(1) inserted (with effect in accordance with Sch. 2 para. 62 of the amending Act) by Finance Act 2017 (c. 10), Sch. 2 para. 28(3)

F149 Words in s. 143(3) inserted (with effect in accordance with Sch. 2 para. 62 of the amending Act) by Finance Act 2017 (c. 10), Sch. 2 para. 28(4)

144 Deduction for payments for private use U.K.

(1) A deduction is to be made from the provisional sum [F150 (see subsection (1A))] if, as a condition of the car being available for the employee’s private use, the employee—

(a) is required in the tax year in question to pay (whether by way of deduction from earnings or otherwise) an amount of money for that use, and

[F151 (b) pays that amount [F152 on or before 6 July following] that year.]

[F153 (1A) In this section “the provisional sum” means the provisional sum calculated under—

(a) step 7 of section 121(1) (method of calculating the cash equivalent of the benefit of a car), or

(b) step 2 of section 121A(1) (optional remuneration arrangements: method of calculating relevant amount).]

(2) If the amount paid [F154 as mentioned in subsection (1)(b)] by the employee in respect of that year is equal to or exceeds the provisional sum, the provisional sum is reduced [F155 so that—

(a) in a case within subsection (1A)(a), the cash equivalent of the benefit of the car for the year is nil, or

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

(3) [F156 Where subsection (2) does not apply,] the amount paid [F157 as mentioned in subsection (1)(b) ] by the employee in respect of the year is deducted from the provisional sum in order to [F158 give—

(a) in a case within subsection (1A)(a), the cash equivalent of the benefit of the car for the year, or

(b) 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).

Textual Amendments

F150 Words in s. 144(1) substituted (with effect in accordance with Sch. 2 para. 62 of the amending Act) by Finance Act 2017 (c. 10), Sch. 2 para. 29(2)

F151 S. 144(1)(b) substituted (with effect in accordance with s. 25(3) of the amending Act) by Finance Act 2014 (c. 26), s. 25(1)

F152 Words in s. 144(1)(b) substituted (with effect in accordance with s. 1(14) of the amending Act) by Finance (No. 2) Act 2017 (c. 32), s. 1(7)(a)

F153 S. 144(1A) inserted (with effect in accordance with Sch. 2 para. 62 of the amending Act) by Finance Act 2017 (c. 10), Sch. 2 para. 29(3)

F154 Words in s. 144(2) inserted (with effect in accordance with s. 1(14) of the amending Act) by Finance (No. 2) Act 2017 (c. 32), s. 1(7)(b)

F155 Words in s. 144(2) substituted (with effect in accordance with Sch. 2 para. 62 of the amending Act) by Finance Act 2017 (c. 10), Sch. 2 para. 29(4)

F156 Words in s. 144(3) substituted (with effect in accordance with Sch. 2 para. 62 of the amending Act) by Finance Act 2017 (c. 10), Sch. 2 para. 29(5)(a)

F157 Words in s. 144(3) inserted (with effect in accordance with s. 1(14) of the amending Act) by Finance (No. 2) Act 2017 (c. 32), s. 1(7)(c)

F158 Words in s. 144(3) substituted (with effect in accordance with Sch. 2 para. 62 of the amending Act) by Finance Act 2017 (c. 10), Sch. 2 para. 29(5)(b)

145 Modification of provisions where car temporarily replaced U.K.

(1) This section applies if—

(a) the car normally available to an employee (“the normal car”) is not available to the employee for a period of less than 30 days,

(b) another car (“the replacement car”) is made available to the employee in order to replace the normal car for the whole or part of that period,

[F159 (c) the employee is chargeable to tax—

(i) in respect of both the normal car and the replacement car by virtue of section 120, or

(ii) in respect of both the normal car and the replacement car by virtue of section 120A, and”.]

(d) the replacement car meets condition A or B.

(2) Condition A is met if the replacement car is not materially better than the normal car.

(3) Condition B is met if the replacement car is not made available to the employee under an arrangement of which the main purpose, or one of the main purposes, is to provide the employee with the benefit of a car which is materially better than the normal car.

(4) If this section applies—

(a) section 143 (deduction for periods when car unavailable) applies so that the replacement car is to be treated as unavailable on the days of the period during which it replaces the normal car, and

(b) section 144 (deduction for payments for private use) applies as if the replacement had not been made and the replacement car were a continuation of the normal car.

(5) A replacement car is regarded as materially better than the normal car if—

(a) it is materially better in quality, or

(b) when calculating the cash equivalent of the benefit of the replacement car, the interim sum calculated under [F160 step 3] of section 121(1) is materially higher than the interim sum calculated in relation to the normal car.

[F161 (6) Where this section applies by virtue of subsection (1)(c)(ii), the condition in subsection (5)(b) is to be taken to be met if it would be met on the assumption that the cash equivalent of the benefit of the cars in question is to be calculated under section 121(1).]

Textual Amendments

F159 S. 145(1)(c) substituted (with effect in accordance with Sch. 2 para. 62 of the amending Act) by Finance Act 2017 (c. 10), Sch. 2 para. 30(2)

F160 Words in s. 145(5) substituted (with effect in accordance with Sch. 28 para. 10(2) of the amending Act) by Finance Act 2009 (c. 10), Sch. 28 para. 3

F161 S. 145(6) inserted (with effect in accordance with Sch. 2 para. 62 of the amending Act) by Finance Act 2017 (c. 10), Sch. 2 para. 30(3)

Cars: special cases U.K.

146 Cars that run on road fuel gas U.K.

(1) This section applies [F162 for the purposes of sections 121 and 121B] if the car—

(a) has been manufactured so as to be capable of running on road fuel gas, and

(b) is not a car to which section 137 (different CO₂ emissions figure for bi-fuel cars) applies.

(2) The price of the car found under step 1 of section 121(1) [F163 or (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.

Textual Amendments

F162 Words in s. 146(1) inserted (with effect in accordance with Sch. 2 para. 62 of the amending Act) by Finance Act 2017 (c. 10), Sch. 2 para. 31(2)

F163 Words in s. 146(2) inserted (with effect in accordance with Sch. 2 para. 62 of the amending Act) by Finance Act 2017 (c. 10), Sch. 2 para. 31(3)

147 Classic cars: 15 years of age or more U.K.

(1) This section applies in calculating the cash equivalent of the benefit of a car for a tax year 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 [F164 interim sum calculated under] step 3 of section 121(1).

(2) For the [F165 interim sum calculated under] step 3 substitute the market value of the car for the tax year in question less any deductions under subsection (6).

(3) The market value of a car for a tax year is the price which the car might reasonably have been expected to fetch on a sale in the open market on—

(a) the last day of that year, or

(b) the last day in that year on which the car is available to the employee if that is earlier.

(4) It is assumed that any qualifying accessories available with the car on that day are included in the sale.

(5) Subsection (6) applies if the employee contributes a capital sum to expenditure on the provision of—

(a) the car, or

(b) any qualifying accessory which is taken into account in determining the market value of the car.

(6) A deduction is to be made from the market value of the car—

(a) for the tax year in which the contribution is made, and

(b) for all subsequent years in which the employee is chargeable to tax in respect of the car by virtue of section 120.

(7) The amount of the deduction allowed in any tax year is the lesser of—

(a) the total of the capital sums contributed by the employee in that year and any earlier years to expenditure on the provision of—

(i) the car, or

(ii) any qualifying accessory which is taken into account in determining the market value of the car for the tax year in question, and

(b) £5,000.

Textual Amendments

F164 Words in s. 147(1) substituted (with effect in accordance with Sch. 28 para. 10(2) of the amending Act) by Finance Act 2009 (c. 10), Sch. 28 para. 4

F165 Words in s. 147(2) substituted (with effect in accordance with Sch. 28 para. 10(2) of the amending Act) by Finance Act 2009 (c. 10), Sch. 28 para. 4

[F166 147A Classic cars: optional remuneration arrangements U.K.

(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).]

Textual Amendments

F166 S. 147A inserted (with effect in accordance with Sch. 2 para. 62 of the amending Act) by Finance Act 2017 (c. 10), Sch. 2 para. 32

Cars: reduction where shared car U.K.

148 Reduction of cash equivalent where car is shared U.K.

(1) This section applies [F167 for 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 [F168 sections 120 and 120A] .

[F169 (2) 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).]

[F170 (2A) [F171 In 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.]

[F172 (2B) 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.]

F173 (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(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.

Textual Amendments

F167 Words in s. 148(1) inserted (with effect in accordance with Sch. 2 para. 62 of the amending Act) by Finance Act 2017 (c. 10), Sch. 2 para. 33(2)(a)

F168 Words in s. 148(1) substituted (with effect in accordance with Sch. 2 para. 62 of the amending Act) by Finance Act 2017 (c. 10), Sch. 2 para. 33(2)(b)

F169 S. 148(2) substituted (with effect in accordance with Sch. 2 para. 62 of the amending Act) by Finance Act 2017 (c. 10), Sch. 2 para. 33(3)

F170 S. 148(2A) inserted (1.3.2012) by The Enactment of Extra-Statutory Concessions Order 2012 (S.I. 2012/266), arts. 1, 3(3)(b)

F171 Words in s. 148(2A) inserted (with effect in accordance with Sch. 2 para. 62 of the amending Act) by Finance Act 2017 (c. 10), Sch. 2 para. 33(4)

F172 S. 148(2B) inserted (with effect in accordance with Sch. 2 para. 62 of the amending Act) by Finance Act 2017 (c. 10), Sch. 2 para. 33(5)

F173 S. 148(3) omitted (with effect in accordance with s. 13(4) of the amending Act) by virtue of Finance Act 2015 (c. 11), Sch. 1 para. 7

Car fuel: benefit treated as earnings U.K.

149 Benefit of car fuel treated as earnings U.K.

(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 [F174 or 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 [F175 or any energy for a car which cannot in any circumstances emit CO₂ by being driven].

Textual Amendments

F174 Words in s. 149(1)(b) inserted (with effect in accordance with Sch. 2 para. 62 of the amending Act) by Finance Act 2017 (c. 10), Sch. 2 para. 34

F175 Words in s. 149(4) substituted (with effect for the tax year 2010-11 and subsequent tax years in accordance with s. 58(18) of the amending Act) by Finance Act 2010 (c. 13), s. 58(11)

[F176 149A Benefit of car fuel treated as earnings: optional remuneration arrangements U.K.

(1) This section applies if—

(a) fuel is provided for a car in a tax year by reason of an employee's employment,

(b) the employee is chargeable to tax in respect of the car in the tax year by virtue of section 120 or 120A, and

(c) the fuel is provided pursuant to optional remuneration arrangements.

(2) If the condition in subsection (3) is met—

(a) the amount foregone with respect to the benefit of the fuel (see section 69B) is to be treated as earnings from the employment for the tax year, and

(b) section 149(1) does not apply.

(3) The condition mentioned in subsection (2) is that the amount foregone with respect to the benefit of the fuel is greater than the cash equivalent of the benefit of the fuel.

(4) For the purposes of subsection (3), assume that the cash equivalent of the benefit of the fuel is zero if the condition in subsection (5) is met.

(5) The condition mentioned in subsection (4) is that the benefit of the fuel would be exempt from income tax but for section 228A (exclusion of certain exemptions).

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

(7) Where it is necessary for the purposes of subsections (2)(a) and (3) to apportion an amount of earnings to the benefit of the fuel 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).]

Textual Amendments

F176 S. 149A inserted (with effect in accordance with Sch. 2 para. 62 of the amending Act) by Finance Act 2017 (c. 10), Sch. 2 para. 35

150 Car fuel: calculating the cash equivalent U.K.

(1) The cash equivalent of the benefit of the fuel is the appropriate percentage of [F177 £24,100]

(2) The “appropriate percentage” means the appropriate percentage determined in accordance with sections 133 to 142 for the purpose of calculating the cash equivalent of the benefit of the car for which the fuel is provided.

(3) But the cash equivalent may be—

(a) nil where either of the conditions in section 151 is met;

(b) proportionately reduced under section 152;

(c) reduced under section 153.

Textual Amendments

F177 Word in s. 150(1) substituted (with application in accordance with art. 1(2) of the amending S.I.) by The Van Benefit and Car and Van Fuel Benefit Order 2018 (S.I. 2018/1176), arts. 1(2), 2

151 Car fuel: nil cash equivalent U.K.

(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 F178 ...—

(a) [F179 in 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 [F180 on 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)).

Textual Amendments

F178 Words in s. 151(2) omitted (with effect in accordance with s. 1(14) of the amending Act) by virtue of Finance (No. 2) Act 2017 (c. 32), s. 1(8)(a)

F179 Words in s. 151(2)(a) inserted (with effect in accordance with s. 1(14) of the amending Act) by Finance (No. 2) Act 2017 (c. 32), s. 1(8)(b)

F180 Words in s. 151(2)(b) inserted (with effect in accordance with s. 1(14) of the amending Act) by Finance (No. 2) Act 2017 (c. 32), s. 1(8)(c)

152 Car fuel: proportionate reduction of cash equivalent U.K.

(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 car for which the fuel is provided is unavailable (within the meaning of section 143 (deduction for periods when car unavailable)).

(2) The cash equivalent of the benefit of the fuel is also to be proportionately reduced if F181 ...—

(a) [F182 for any part of the tax year in question,] the facility for the provision of fuel as mentioned in section 149(1) is not available,

(b) [F183 for any part of the tax year in question,] the fuel is made available only for business travel (see section 171(1)), or

(c) the employee[F184 —

(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 [F185 , 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—

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.

Textual Amendments

F181 Words in s. 152(2) omitted (with effect in accordance with s. 1(14) of the amending Act) by virtue of Finance (No. 2) Act 2017 (c. 32), s. 1(9)(a)

F182 Words in s. 152(2)(a) inserted (with effect in accordance with s. 1(14) of the amending Act) by Finance (No. 2) Act 2017 (c. 32), s. 1(9)(b)

F183 Words in s. 152(2)(b) inserted (with effect in accordance with s. 1(14) of the amending Act) by Finance (No. 2) Act 2017 (c. 32), s. 1(9)(c)

F184 S. 152(2)(c)(i) inserted (with effect in accordance with s. 1(14) of the amending Act) by Finance (No. 2) Act 2017 (c. 32), s. 1(9)(d)(i)

F185 Words in s. 152(2)(c) substituted (with effect in accordance with s. 1(14) of the amending Act) by Finance (No. 2) Act 2017 (c. 32), s. 1(9)(d)(ii)

153 Car fuel: reduction of cash equivalent U.K.

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 U.K.

154 Benefit of van treated as earnings U.K.

(1) [F186 If 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.]

[F187 (2) 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.]

[F188 (4) This section is subject to section 154A.]

Textual Amendments

F186 s. 154 renumbered as s. 154(1) (with effect in accordance with s. 7(9) of the amending Act) by Finance Act 2016 (c. 24), s. 7(7)(a)

F187 S. 154(2)(3) inserted (with effect in accordance with s. 7(9) of the amending Act) by Finance Act 2016 (c. 24), s. 7(7)(b)

F188 S. 154(4) inserted (with effect in accordance with Sch. 2 para. 62 of the amending Act) by Finance Act 2017 (c. 10), Sch. 2 para. 36

[F189 154A Benefit of van treated as earnings: optional remuneration arrangements U.K.

(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) [F190 the 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—

• [F191 Step 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 [F192 a 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).

[F193 (8) 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.]]

Textual Amendments

F189 S. 154A inserted (with effect in accordance with Sch. 2 para. 62 of the amending Act) by Finance Act 2017 (c. 10), Sch. 2 para. 37

F190 Words in s. 154A(2)(b) substituted (with effect in accordance with s. 7(7) of the amending Act) by Finance Act 2019 (c. 1), s. 7(5)(a)

F191 Words in s. 154A(3) substituted (with effect in accordance with s. 7(7) of the amending Act) by Finance Act 2019 (c. 1), s. 7(5)(b)

F192 Words in s. 154A(7) substituted (with effect in accordance with s. 7(7) of the amending Act) by Finance Act 2019 (c. 1), s. 7(5)(c)

F193 S. 154A(8) inserted (with effect in accordance with s. 7(7) of the amending Act) by Finance Act 2019 (c. 1), s. 7(5)(d)

[F194 155 Cash equivalent of the benefit of a van U.K.

[F195 (1) The cash equivalent of the benefit of a van for a tax year is calculated as follows.

(1A) If the restricted private use condition is met in relation to the van for the tax year, the cash equivalent is nil.

(1B) If that condition is not met in relation to the van for the tax year—

(a) if the van cannot in any circumstances emit CO₂ by being driven and the tax year is any of the tax years 2015-16 to [F196 2021-22], the cash equivalent is the appropriate percentage of [F197 £3,430] and

(b) in any other case, the cash equivalent is [F197 £3,430]

(1C) The appropriate percentage for the purposes of subsection (1B)(a) is—

(a) 20% for the tax year 2015-16,

[F198 (b) 20% for the tax year 2016-17;

(c) 60% for the tax year 2017-18,

(d) 80% for the tax year 2018-19, and

(e) 90% for the tax year 2019-20.

(f) 80% for the tax year 2020-21;

(g) 90% for the tax year 2021-22.]]

(4) The restricted private use condition is met in relation to a van for a tax year if—

(a) the commuter use requirement is satisfied throughout the year (or the part of the year on which it is available to the employee) or the extent to which it is not satisfied during that period is insignificant, and

(b) the business travel requirement is satisfied throughout the year (or the part of the year on which it is available to the employee).

(5) The commuter use requirement is satisfied at any time if—

(a) the terms on which the van is available to the employee at the time prohibit its private use otherwise than for the purposes of ordinary commuting or travel between two places that is for practical purposes substantially ordinary commuting, and

(b) neither the employee nor a member of the employee’s family or household makes private use of the van at the time otherwise than for those purposes.

(6) In subsection (5) “ordinary commuting” has the same meaning as in section 338 (travel for necessary attendance) (see subsection (3) of that section).

(7) The business travel requirement is satisfied at a time if the van is available to the employee at the time mainly for use for the purposes of the employee’s business travel (see section 171(1)).

(8) The cash equivalent of the van may be reduced—

(a) under section 156 for any periods when the van is unavailable,

(b) under section 157 where the van is shared, and

(c) under section 158 in respect of payments by the employee for the private use of the van.]

Textual Amendments

F194 Ss. 155-164 substituted for ss. 155-166 (with effect in accordance with s. 80(2) of the amending Act) by Finance Act 2004 (c. 12), Sch. 14 para. 5

F195 S. 155(1)-(1C) substituted for s. 155(1)(2) (with effect in accordance with s. 10(8) of the amending Act) by Finance Act 2015 (c. 11), s. 10(2)

F196 Word in s. 155(1B)(a) substituted (with effect in accordance with s. 11(4) of the amending Act) by Finance Act 2016 (c. 24), s. 11(2)

F197 Word in s. 155(1B)(a)(b) substituted (with application in accordance with art. 1(2) of the amending S.I.) by The Van Benefit and Car and Van Fuel Benefit Order 2018 (S.I. 2018/1176), arts. 1(2), 3

F198 S. 155(1C)(b)-(g) substituted for s. 155(1C)(b)-(e) (with effect in accordance with s. 11(4) of the amending Act) by Finance Act 2016 (c. 24), s. 11(3)

[F194 Vans: reductions of cash equivalent U.K.

156 Meaning of “shared van” U.K.

(1) The cash equivalent of the benefit of a van for a tax year under section [F199 155] is to be reduced if the van has been unavailable on any day during the year.

(2) For the purposes of this section a van is unavailable on any day if the day—

(a) falls before the first day on which the van is available to the employee,

(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

CE is the amount of the cash equivalent before any reduction.]

Textual Amendments

F199 Word in s. 156(1) substituted (with effect in accordance with s. 10(8) of the amending Act) by Finance Act 2015 (c. 11), s. 10(3)

[F194 Reduction of cash equivalent where van is shared U.K.

157 Reduction of cash equivalent where van is shared U.K.

(1) This section applies if in a tax year a van—

(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.

(2) The cash equivalent of the benefit of the van to each of those employees for that year—

(a) is to be calculated separately under sections 155 and 156, and

(b) is then to be reduced on a just and reasonable basis.

F200 (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4) In this section the reference to the van being available for each 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.]

Textual Amendments

F200 S. 157(3) omitted (with effect in accordance with s. 13(4) of the amending Act) by virtue of Finance Act 2015 (c. 11), Sch. 1 para. 8

[F194 Reduction for payments for private use U.K.

158 Reduction for payments for private use U.K.

(1) The cash equivalent of the benefit of a van for a tax year under section [F201 155] (after any reduction under sections 156 and 157) is to be reduced if, as a condition of the van being available for the employee’s private use, the employee—

(a) is required in that year to pay (whether by way of deduction from earnings or otherwise) an amount of money for that use, and

[F202 (b) pays that amount [F203 on or before 6 July following] that year.]

(2) If the amount paid [F204 as 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 [F205 as 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.

Textual Amendments

F201 Word in s. 158(1) substituted (with effect in accordance with s. 10(8) of the amending Act) by Finance Act 2015 (c. 11), s. 10(4)

F202 S. 158(1)(b) substituted (with effect in accordance with s. 25(3) of the amending Act) by Finance Act 2014 (c. 26), s. 25(2)

F203 Words in s. 158(1)(b) substituted (with effect in accordance with s. 1(14) of the amending Act) by Finance (No. 2) Act 2017 (c. 32), s. 1(10)(a)

F204 Words in s. 158(2) inserted (with effect in accordance with s. 1(14) of the amending Act) by Finance (No. 2) Act 2017 (c. 32), s. 1(10)(b)

F205 Words in s. 158(3) inserted (with effect in accordance with s. 1(14) of the amending Act) by Finance (No. 2) Act 2017 (c. 32), s. 1(10)(c)

[F206 158A Van provided pursuant to optional remuneration arrangements: private use U.K.

(1) In calculating the relevant amount under section 154A in relation to a van and a tax year, a deduction is to be made under step 2 of subsection (3) of that section if, as a condition of the van being available for the employee's private use, the employee—

(a) is required in that year to pay (whether by way of deduction from earnings or otherwise) an amount of money for that use, and

(b) pays that amount on or before 6 July following that year.

(2) The amount of the deduction is—

(a) the amount paid as mentioned in subsection (1)(b) by the employee in respect of the year, or

(b) if less, the amount that would reduce the relevant amount to nil.

(3) 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.]]

Textual Amendments

F206 S. 158A inserted (with effect in accordance with Sch. 2 para. 62 of the amending Act) by Finance Act 2017 (c. 10), Sch. 2 para. 38

[F194 Modification of provisions where van temporarily replaced U.K.

159 Modification of provisions where van temporarily replaced U.K.

(1) This section applies if—

(a) the van normally available to an employee (“the normal van”) is not available to the employee for a period of less than 30 days,

(b) another van (“the replacement van”) is made available to the employee in order to replace the normal van for the whole or part of that period, and

(c) the employee is chargeable to tax in respect of both the normal van and the replacement van by virtue of section 154.

(2) If this section applies—

(a) section 156 applies so that the replacement van is to be treated as unavailable on the days during the period on which it replaces the normal van, and

(b) sections 155, 157 and 158 apply as if the replacement van were the normal van.]

[F194 Van fuel: benefit treated as earnings U.K.

160 Benefit of van fuel treated as earnings U.K.

(1) If in a tax year—

(a) fuel is provided for a van by reason of an employee’s employment,

(b) that person is chargeable to tax in respect of the van by virtue of section 154 [F207 or 154A] , and

(c) the cash equivalent of the van for that year is that under [F208 section 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.

F209 (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F210 (5) This section is subject to section 160A.]]

Textual Amendments

F207 Words in s. 160(1)(b) inserted (with effect in accordance with Sch. 2 para. 62 of the amending Act) by Finance Act 2017 (c. 10), Sch. 2 para. 39(2)

F208 Words in s. 160(1)(c) substituted (with effect in accordance with s. 10(8) of the amending Act) by Finance Act 2015 (c. 11), s. 10(5)

F209 S. 160(4) omitted (with effect for the tax year 2010-11 and subsequent tax years in accordance with s. 58(18) of the amending Act) by virtue of Finance Act 2010 (c. 13), s. 58(14)(b)

F210 S. 160(5) inserted (with effect in accordance with Sch. 2 para. 62 of the amending Act) by Finance Act 2017 (c. 10), Sch. 2 para. 39(3)

[F211 160A Benefit of van fuel treated as earnings: optional remuneration arrangements U.K.

(1) This section applies if—

(a) fuel is provided for a van in a tax year by reason of an employee's employment,

(b) the benefit of the fuel is provided pursuant to optional remuneration arrangements, and

(c) the employee is chargeable to tax in respect of the van in the tax year by virtue of section 154 or 154A.

(2) If the condition in subsection (3) is met—

(a) the amount foregone with respect to the benefit of the fuel (see section 69B) is to be treated as earnings from the employment for that year, and

(b) section 160(1) does not apply.

(3) The condition mentioned in subsection (2) is that the amount foregone with respect to the benefit of the fuel is greater than the cash equivalent of the benefit of the fuel.

(4) For the purposes of subsection (3), assume that the cash equivalent of the benefit of the fuel is zero if the condition mentioned in subsection (5) is met.

(5) The condition mentioned in subsection (4) is that the benefit of the fuel would be exempt from income tax but for section 228A (exclusion of certain exemptions).

(6) Where it is necessary for the purposes of subsections (2)(a) and (3) to apportion an amount of earnings to the benefit of the fuel 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).]

Textual Amendments

F211 S. 160A inserted (with effect in accordance with Sch. 2 para. 62 of the amending Act) by Finance Act 2017 (c. 10), Sch. 2 para. 40

[F194 161 Van fuel: the cash equivalent U.K.

The cash equivalent of the benefit of the fuel is—

(a) where the tax year is the tax year 2005-06 or 2006-07, nil, and

(b) where the tax year is a later tax year, [F212 £655]]

Textual Amendments

F212 Word in s. 161(b) substituted (with application in accordance with art. 1(2) of the amending S.I.) by The Van Benefit and Car and Van Fuel Benefit Order 2018 (S.I. 2018/1176), arts. 1(2), 4

[F194 162 Van fuel: nil cash equivalent U.K.

(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 F213 ...—

(a) [F214 in 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 [F215 on 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)).]

Textual Amendments

F213 Words in s. 162(2) omitted (with effect in accordance with s. 1(14) of the amending Act) by virtue of Finance (No. 2) Act 2017 (c. 32), s. 1(11)(a)

F214 Words in s. 162(2)(a) inserted (with effect in accordance with s. 1(14) of the amending Act) by Finance (No. 2) Act 2017 (c. 32), s. 1(11)(b)

F215 Words in s. 162(2)(b) inserted (with effect in accordance with s. 1(14) of the amending Act) by Finance (No. 2) Act 2017 (c. 32), s. 1(11)(c)

[F194 163 Van fuel: proportionate reduction of cash equivalent U.K.

(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 F216 ...—

(a) [F217 for 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) [F218 for any part of the tax year in question,] the fuel is made available only for business travel (see section 171(1)), or

(c) the employee[F219 —

(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] [F220 , 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.]

Textual Amendments

F216 Words in s. 163(3) omitted (with effect in accordance with s. 1(14) of the amending Act) by virtue of Finance (No. 2) Act 2017 (c. 32), s. 1(12)(a)

F217 Words in s. 163(3)(a) inserted (with effect in accordance with s. 1(14) of the amending Act) by Finance (No. 2) Act 2017 (c. 32), s. 1(12)(b)

F218 Words in s. 163(3)(b) inserted (with effect in accordance with s. 1(14) of the amending Act) by Finance (No. 2) Act 2017 (c. 32), s. 1(12)(c)

F219 S. 163(3)(c)(i) inserted (with effect in accordance with s. 1(14) of the amending Act) by Finance (No. 2) Act 2017 (c. 32), s. 1(12)(d)(i)

F220 S. 163(3)(c)(ii) substituted for words (with effect in accordance with s. 1(14) of the amending Act) by Finance (No. 2) Act 2017 (c. 32), s. 1(12)(d)(ii)

[F194 164 Van fuel: reduction of cash equivalent U.K.

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 U.K.

167 Pooled cars U.K.

(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.

168 Pooled vans U.K.

(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) 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 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.

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

(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

[F221 (b) M's employment is lower-paid employment as a minister of religion.]

F222 (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F222 (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F221 S. 169(2)(b) substituted (with effect in accordance with s. 13(4) of the amending Act) by Finance Act 2015 (c. 11), Sch. 1 para. 9(2)

F222 S. 169(3)(4) omitted (with effect in accordance with s. 13(4) of the amending Act) by virtue of Finance Act 2015 (c. 11), Sch. 1 para. 9(3)

[F223 169A Van available to more than one member of family or household employed by same employer U.K.

(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 van being made available to M in a tax year, E would (apart from this section) be chargeable to tax in respect of the van in that year by virtue of section 154.

(2) The cash equivalent of the benefit of the van and of any fuel provided for the van 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 van in that year by virtue of section 154, or

[F224 (b) M's employment is lower-paid employment as a minister of religion.]

F225 (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F225 (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .]

Textual Amendments

F223 S. 169A inserted (with effect in accordance with s. 80(2) of the amending Act) by Finance Act 2004 (c. 12), Sch. 14 para. 6

F224 S. 169A(2)(b) substituted (with effect in accordance with s. 13(4) of the amending Act) by Finance Act 2015 (c. 11), Sch. 1 para. 10(2)

F225 S. 169A(3)(4) omitted (with effect in accordance with s. 13(4) of the amending Act) by virtue of Finance Act 2015 (c. 11), Sch. 1 para. 10(3)

Orders U.K.

170 Orders etc. relating to this Chapter U.K.

(1) The Treasury may by order substitute a greater amount for that for the time being specified in—

F226 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(b) section 126(3)(d) (car: minimum price of later accessory),

(c) section 132(3)(b) (car: maximum contributions deduction),

[F227 (ca) section 132A(5)(b) (corresponding provision with respect to optional remuneration arrangements),]

(d) section 147(1)(b) (classic car: minimum value), F228 ...

(e) section 147(7)(b) (classic car: maximum contributions deduction)[F229 , or

(f) section 147A(1)(b) (classic car: minimum value: optional remuneration arrangements).]

[F230 (1A) The Treasury may by order substitute a different amount for the amount for the time being specified in—

(a) section 155(1A) (cash equivalent where van subject only to restricted private use by employee),

(b) section 155(1B)(a) (cash equivalent for zero-emission van), and

(c) section 155(1B)(b) (cash equivalent in other cases).]

(2) An order under subsection (1) [F231 or (1A)] must specify the tax years to which it applies.

F232 (2A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F233 (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4) The Treasury may by regulations provide for the value of the appropriate percentage as determined under sections 139 [F234 and 140] to be reduced—

(a) by such amount,

(b) in such circumstances, and

(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) [F235 or 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.

Textual Amendments

F226 S. 170(1)(a) omitted (with effect in accordance with Sch. 28 para. 10(2) of the amending Act) by virtue of Finance Act 2009 (c. 10), Sch. 28 para. 5

F227 S. 170(1)(ca) inserted (with effect in accordance with Sch. 2 para. 62 of the amending Act) by Finance Act 2017 (c. 10), Sch. 2 para. 41(a)

F228 Word in s. 170(1)(d) omitted (with effect in accordance with Sch. 2 para. 62 of the amending Act) by virtue of Finance Act 2017 (c. 10), Sch. 2 para. 41(b)

F229 S. 170(1)(f) and word inserted (with effect in accordance with Sch. 2 para. 62 of the amending Act) by Finance Act 2017 (c. 10), Sch. 2 para. 41(c)

F230 S. 170(1A) substituted (with effect in accordance with s. 10(8) of the amending Act) by Finance Act 2015 (c. 11), s. 10(6)

F231 Words in s. 170(2) inserted (with effect in accordance with s. 80(2) of the amending Act) by Finance Act 2004 (c. 12), Sch. 14 para. 7(3)

F232 S. 170(2A) omitted (with effect in accordance with s. 59(5) of the amending Act) by virtue of Finance Act 2010 (c. 13), s. 59(3)(a)

F233 S. 170(3) omitted (with effect in accordance with s. 2(6) of the amending Act) by virtue of Finance (No. 2) Act 2017 (c. 32), s. 2(5)

F234 Words in s. 170(4) substituted (with effect in accordance with s. 24(17) of the amending Act) by Finance Act 2014 (c. 26), s. 24(15)

F235 Words in s. 170(5) inserted (with effect in accordance with s. 80(2) of the amending Act) by Finance Act 2004 (c. 12), Sch. 14 para. 7(4)

Supplementary U.K.

171 Minor definitions: general U.K.

(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;

• “EC certificate of conformity” means a certificate of conformity [F236 within the meaning of Council Directive 70/156/EEC or Directive 2007/46/EC of the European Parliament and of the Council of 5 September 2007] ;

• “EC type-approval certificate” means a type-approval certificate issued under any provision of the law of a Member State implementing [F237 Council Directive 70/156/EEC or an EC type-approval certificate within the meaning of Council Directive 2007/46/EC] ;

• “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;

• “UK approval certificate” means a certificate issued under—

  (a)

  section 58(1) or (4) of the Road Traffic Act 1988 (c. 52), or

  (b)

  Article 31A(4) or (5) of the Road Traffic (Northern Ireland) Order 1981 (S.I. 1981/154 (N.I. 1)).

(2) In this Chapter references to the date of first registration in relation to a car F238 ... 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 F239 ... 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).

Textual Amendments

F236 Words in s. 171(1) substituted (with effect in accordance with s. 48(12) of the amending Act) by Finance Act 2018 (c. 3), s. 48(11)(a)

F237 Words in s. 171(1) substituted (with effect in accordance with s. 48(12) of the amending Act) by Finance Act 2018 (c. 3), s. 48(11)(b)

F238 Words in s. 171(2) repealed (with effect in accordance with Sch. 42 Pt. 2(9) of the repealing Act) by Finance Act 2004 (c. 12), Sch. 42 Pt. 2(9)

F239 Words in s. 171(3) repealed (with effect in accordance with Sch. 42 Pt. 2(9) of the repealing Act) by Finance Act 2004 (c. 12), Sch. 42 Pt. 2(9)

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

(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.

Chapter 7 U.K. Taxable benefits: loans

Modifications etc. (not altering text)

C6 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 U.K.

173 Loans to which this Chapter applies U.K.

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

[F240 (1A) 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 [F241 make 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.

Textual Amendments

F240 S. 173(1A) inserted (with effect in accordance with s. 7(9) of the amending Act) by Finance Act 2016 (c. 24), s. 7(8)

F241 Words in s. 173(1A)(b) substituted (with effect in accordance with Sch. 2 para. 62 of the amending Act) by Finance Act 2017 (c. 10), Sch. 2 para. 42

[F242 173A Alternative finance arrangements U.K.

(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 financial institution'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 financial institution, 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, and

• “financial institution” has the meaning given in section 564B of ITA 2007 or section 502 of CTA 2009.

(5) This section does not apply to arrangements entered into before 22 March 2006.]

Textual Amendments

F242 S. 173A inserted (with effect in accordance with s. 381(1) of the amending Act) by Taxation (International and Other Provisions) Act 2010 (c. 8), s. 381(1), Sch. 2 para. 49 (with Sch. 9 paras. 1-9, 22)

174 Employment-related loans U.K.

(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

A loan made by the employee’s employer.

B

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

C

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

D

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.

E

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.

(4) References in this section to a loan being made by a person extend to a person who—

(a) assumes the rights and liabilities of the person who originally made the loan, or

(b) arranges, guarantees or in any way facilitates the continuation of a loan already in existence.

(5) A loan is not an employment-related loan if—

(a) it is made by an individual in the normal course of the individual’s domestic, family or personal relationships, or

(b) it is made to a relative of the employee and the employee derives no benefit from it.

(6) For the purposes of this section a person (“X”) is a relative of another (“Y”) if X is—

(a) Y’s spouse [F243 or civil partner] ,

(b) a parent, child or remoter relation in the direct line either of Y or of Y’s spouse [F243 or civil partner] ,

(c) a brother or sister of Y or of Y’s spouse [F243 or civil partner] , or

(d) the spouse [F243 or civil partner] of a person falling within paragraph (b) or (c).

Textual Amendments

F243 Words in s. 174(6) inserted (5.12.2005) by The Tax and Civil Partnership Regulations 2005 (S.I. 2005/3229), regs. 1(1), 141

Benefit of taxable cheap loan treated as earnings U.K.

175 Benefit of taxable cheap loan treated as earnings U.K.

[F244 (A1) This section applies where an employment-related loan is a taxable cheap loan in relation to a tax year.

(1) The cash equivalent of the benefit of the loan is to be treated as earnings from the employee's employment for the tax year.

(1A) If the benefit of the loan is provided pursuant to optional remuneration arrangements and the condition in subsection (1B) is met—

(a) subsection (1) does not apply, and

(b) the relevant amount (see section 175A) is to be treated as earnings from the employee's employment for the tax year.

(1B) The condition is that the amount foregone with respect to the benefit of the loan for the tax year (see section 69B) is greater than the modified cash equivalent of the benefit of the loan for the tax year (see section 175A).]

(2) For the purposes of this Chapter an employment-related loan is a “taxable cheap loan” in relation to a particular tax year if—

(a) there is a period consisting of the whole or part of that year during which the loan is outstanding and the employee holds the employment,

(b) no interest is paid on it for that year, or the amount of interest paid on it for that year is less than the interest that would have been payable at the official rate, and

(c) none of the exceptions in sections 176 to 179 apply.

(3) The cash equivalent of the benefit of an employment-related loan for a tax year is the difference between—

(a) the amount of interest that would have been payable on the loan for that year at the official rate, and

(b) the amount of interest (if any) actually paid on the loan for that year.

(4) If there are two or more employment-related loans, this section applies to each separately.

(5) This section is subject to—

• section 180 (threshold for benefit of loan to be treated as earnings);

• section 186 (replacement loans).

Textual Amendments

F244 S. 175(A1)-(1B) substituted for s. 175(1) (with effect in accordance with Sch. 2 para. 62 of the amending Act) by Finance Act 2017 (c. 10), Sch. 2 para. 43

[F245 175A Optional remuneration arrangements: “relevant amount” and “modified cash equivalent” U.K.

(1) In section 175(1A) “the relevant amount”, in relation to a loan the benefit of which is provided pursuant to optional remuneration arrangements, means the difference between—

(a) the amount foregone (see section 69B) with respect to the benefit of the loan, and

(b) the amount of interest (if any) actually paid on the loan for the tax year.

(2) For the purposes of section 175 the “modified cash equivalent” of the benefit of an employment-related loan for a tax year is the amount which would be the cash equivalent if section 175(3) had effect with the following modifications—

(a) in the opening words, omit “the difference between”;

(b) omit paragraph (b) and the “and” before it.

(3) But the modified cash equivalent of the benefit of the loan is to be taken to be zero if the condition in subsection (4) is met.

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

(5) For the purpose of calculating the modified cash equivalent of the benefit of an employment-related loan, assume that section 186(2) (replacement loans: aggregation) and section 187(3) (aggregation of loans by close company to a director) do not have effect.

(6) Where it is necessary for the purposes of section 175(1B) and subsection (1) of this section to apportion an amount of earnings to the benefit of the loan 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).]

Textual Amendments

F245 S. 175A inserted (with effect in accordance with Sch. 2 para. 62 of the amending Act) by Finance Act 2017 (c. 10), Sch. 2 para. 44(1)

176 Exception for loans on ordinary commercial terms U.K.

(1) A loan on ordinary commercial terms is not a taxable cheap loan.

(2) In this section a “loan on ordinary commercial terms” means a loan—

(a) made by a person (“the lender”) in the ordinary course of a business carried on by the lender which includes—

(i) the lending of money, or

(ii) the supplying of goods or services on credit, and

(b) in relation to which condition A, B or C is met.

(3) Condition A is met if—

(a) at the time the loan was made comparable loans were available to all those who might be expected to avail themselves of the services provided by the lender in the course of the lender’s business,

(b) a substantial proportion of the loans (consisting of the loan in question and the comparable loans) made by the lender at or about the time the loan in question was made were made to members of the public,

(c) the loan in question is held on the same terms as comparable loans generally made by the lender to members of the public at or about the time the loan in question was made, and

(d) where those terms differ from the terms applicable immediately after the loan in question was first made, they were imposed in the ordinary course of the lender’s business.

(4) For the purposes of condition A a loan is comparable to another loan if it is made for the same or similar purposes and on the same terms and conditions.

(5) Condition B is met if—

(a) the loan has been varied before 6th April 2000,

(b) a substantial proportion of the relevant loans were made to members of the public,

(c) the loan in question is held on the same terms as relevant loans generally made by the lender to members of the public at or about the relevant time, and

(d) where those terms differ from the terms applicable immediately after the relevant time, they were imposed in the ordinary course of the lender’s business.

(6) Condition C is met if—

(a) the loan has been varied on or after 6th April 2000,

(b) a substantial proportion of the relevant loans were made to members of the public,

(c) at the relevant time members of the public who had loans from the lender for similar purposes had a right to vary their loans on the same terms and conditions as applied in relation to the variation of the loan in question,

(d) the loan in question as varied is held on the same terms as any existing loans so varied, and

(e) where those terms differ from the terms applicable immediately after the relevant time, they were imposed in the ordinary course of the lender’s business.

(7) For the purposes of condition B and C—

(a) the “relevant time” is the time of the variation of the loan in question, and

(b) the “relevant loans” are—

(i) the loan in question,

(ii) any existing loans which were varied at or about the relevant time so as to be held on the same terms as the loan in question after it was varied, and

(iii) any new loans which were made by the lender at or about that time and are held on those terms.

(8) No account is to be taken of amounts which are incurred on fees, commission or other incidental expenses by the person to whom a loan is made for the purpose of obtaining the loan—

(a) in determining for the purposes of condition A whether loans made by a lender before 1st June 1994 are made or held on the same terms or conditions, or

(b) in determining for the purposes of condition B or C whether rights to vary loans are exercisable on the same terms and conditions or loans are held on the same terms.

(9) No account is to be taken of amounts which are incurred on penalties, interest or similar amounts by the person to whom a loan is made as a result of varying the loan in determining for the purposes of condition B or C whether rights to vary loans are exercisable on the same terms and conditions or loans are held on the same terms.

(10) For the purposes of this section a “member of the public” means a member of the public at large with whom the lender deals at arm’s length.

177 Exceptions for loans at fixed rate of interest U.K.

(1) A fixed rate loan made on or after 6th April 1978 is not a taxable cheap loan by reason only of an increase in the official rate of interest since the year in which the loan was made if the condition in subsection (2) is met.

(2) The condition in this subsection is met if the amount of interest paid on the loan for the tax year in which it was made was equal to or greater than the interest that would have been payable at the official rate for that year.

(3) A fixed rate loan made before 6th April 1978 is not a taxable cheap loan if the condition in subsection (4) is met.

(4) The condition in this subsection is met if the rate of interest for the loan is equal to or greater than the rate which could have been expected to apply to a loan made—

(a) at the same time as the loan in question,

(b) on the same terms (other than as to the rate of interest), and

(c) between persons not connected with each other dealing at arm’s length.

(5) In this section a “fixed rate loan” means a loan—

(a) made for a fixed period which cannot be changed, and

(b) made at a fixed rate of interest which cannot be changed during that period.

178 Exception for loans where interest qualifies for tax relief U.K.

A loan is not a taxable cheap loan in relation to a particular tax year if, assuming interest is paid on the loan for that year (whether or not it is in fact paid), the whole of that interest—

(a) is eligible for relief under section 353 of ICTA [F246 or section 383 of ITA 2007 (relief for interest payments)],

(b) would be eligible for relief under [F247 section 353 of ICTA] but for the fact that it is a payment of relevant loan interest to which section 369 of ICTA applies (mortgage interest payable under deduction of tax),

(c) is deductible in computing the amount of the profits to be charged [F248 to tax] in respect of a trade, profession or vocation carried on [F249 wholly or partly in the United Kingdom] by the person to whom the loan is made, or

(d) is deductible in computing the amount of the profits to be charged [F250 to tax in respect of a UK property business [F251 (within the meaning of Chapter 2 of Part 3 of ITTOIA 2005 or Chapter 2 of Part 4 of CTA 2009)]] carried on by that person.

Textual Amendments

F246 Words in s. 178(a) substituted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 431(a) (with Sch. 2)

F247 Words in s. 178(b) substituted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 431(b) (with Sch. 2)

F248 Words in s. 178(c) substituted (6.4.2005) by Income Tax (Trading and Other Income) Act 2005 (c. 5), s. 883(1), Sch. 1 para. 587(a)(i) (with Sch. 2)

F249 Words in s. 178(c) inserted (6.4.2005) by Income Tax (Trading and Other Income) Act 2005 (c. 5), s. 883(1), Sch. 1 para. 587(a)(ii) (with Sch. 2)

F250 Words in s. 178(d) substituted (6.4.2005) by Income Tax (Trading and Other Income) Act 2005 (c. 5), s. 883(1), Sch. 1 para. 587(b) (with Sch. 2)

F251 Words in s. 178(d) substituted (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 1 para. 550 (with Sch. 2 Pts. 1, 2)

179 Exception for certain advances for necessary expenses U.K.

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

(a) necessary expenses, or

(b) incidental overnight expenses,

is not a taxable cheap loan in relation to a particular tax year if the following conditions are met.

(2) The conditions are—

(a) that at all times in the tax year in question the amount outstanding on such advances made by the employer to the employee does not exceed £1,000,

(b) that the advance is spent within 6 months after the date on which it is made, and

(c) that the employee accounts to the employer at regular intervals for the expenditure of the amount advanced.

(3) If, on an application made by the employer, [F252 an officer of Revenue and Customs is] satisfied that there is good reason to do so in the case of a particular advance, [F253 the officer] may authorise that either or both of the following limits are increased in relation to that advance—

(a) the sum of money specified in subsection (2)(a);

(b) the time limit specified in subsection (2)(b).

(4) An application under subsection (3)—

(a) must be in writing, and

(b) must contain such particulars and be supported by such evidence as [F18 an officer of Revenue and Customs] may require.

(5) In this section “necessary expenses” are expenses (including travel expenses) which—

(a) the employee is obliged to incur and pay as holder of the employment, and

(b) are necessarily incurred in the performance of the duties of the employment.

(6) In this section “incidental overnight expenses” are expenses which—

(a) are incidental to the employee’s absence from the place where the employee normally lives,

(b) relate to a continuous period of such absence in relation to which the overnight stay conditions are met, and

(c) would not be deductible under Part 5 if the employee incurred and paid them and Chapter 2 of Part 4 (mileage allowances and passenger payments) did not apply.

(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)).

Textual Amendments

F18 Words in Act substituted (18.4.2005) by Commissioners for Revenue and Customs Act 2005 (c. 11), s. 53(1), Sch. 4 para. 102(1); S.I. 2005/1126, art. 2(2)(h)

F252 Words in s. 179(3) substituted (18.4.2005) by Commissioners for Revenue and Customs Act 2005 (c. 11), s. 53(1), Sch. 4 para. 109; S.I. 2005/1126, art. 2(2)(h)

F253 Words in s. 179(3) substituted (18.4.2005) by Commissioners for Revenue and Customs Act 2005 (c. 11), s. 53(1), Sch. 4 para. 103(1)(e); S.I. 2005/1126, art. 2(2)(h)

180 Threshold for benefit of loan to be treated as earnings U.K.

(1) [F254 Section 175 does not have effect in relation to an employee and a tax year—]

(a) if the normal [F255 £10,000] threshold is not exceeded, or

(b) where the loan is a non-qualifying loan and that threshold is exceeded, if the [F255 £10,000] threshold for non-qualifying loans is not exceeded.

(2) The normal [F256 £10,000] threshold is not exceeded if at all times in the year the amount outstanding on the loan (or, if two or more employment-related loans which are taxable cheap loans are outstanding in the year, the aggregate of the amount outstanding on them) does not exceed [F256 £10,000].

(3) The [F256 £10,000] threshold for non-qualifying loans is not exceeded if at all times in the year the amount outstanding on the loan (or if two or more employment-related loans which are non-qualifying loans are outstanding in the year, the aggregate of the amounts outstanding on them) does not exceed [F256 £10,000].

(4) In this section a “non-qualifying loan” means a taxable cheap loan which is not a qualifying loan.

(5) For the purposes of this section a loan is a “qualifying loan” in relation to a particular tax year if, assuming interest is paid on the loan for that year (whether or not it is in fact paid), the whole or part of that interest—

(a) is eligible for relief under section 353 of ICTA [F257 or section 383 of ITA 2007 (relief for interest payments)],

(b) would be eligible for relief under [F258 section 353 of ICTA] but for the fact that it is a payment of relevant loan interest to which section 369 of ICTA applies (mortgage interest payable under deduction of tax),

(c) is deductible in computing the amount of the profits to be charged [F259 to tax] in respect of a trade, profession or vocation carried on [F260 wholly or partly in the United Kingdom] by the person to whom the loan is made, or

(d) is deductible in computing the amount of the profits to be charged [F261 to tax in respect of a UK property business [F262 (within the meaning of Chapter 2 of Part 3 of ITTOIA 2005 or Chapter 2 of Part 4 of CTA 2009)]] carried on by that person.

Textual Amendments

F254 Words in s. 180(1) substituted (with effect in accordance with Sch. 2 para. 62 of the amending Act) by Finance Act 2017 (c. 10), Sch. 2 para. 45

F255 Word in s. 180(1)(a)(b) substituted (with effect in accordance with s. 22(2) of the amending Act) by Finance Act 2014 (c. 26), s. 22(1)

F256 Word in s. 180(2)(3) substituted (with effect in accordance with s. 22(2) of the amending Act) by Finance Act 2014 (c. 26), s. 22(1)

F257 Words in s. 180(5)(a) substituted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 432(a) (with Sch. 2)

F258 Words in s. 180(5)(b) substituted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 432(b) (with Sch. 2)

F259 Words in s. 180(5)(c) substituted (6.4.2005) by Income Tax (Trading and Other Income) Act 2005 (c. 5), s. 883(1), Sch. 1 para. 588(a)(i) (with Sch. 2)

F260 Words in s. 180(5)(c) inserted (6.4.2005) by Income Tax (Trading and Other Income) Act 2005 (c. 5), s. 883(1), Sch. 1 para. 588(a)(ii) (with Sch. 2)

F261 Words in s. 180(5)(d) substituted (6.4.2005) by Income Tax (Trading and Other Income) Act 2005 (c. 5), s. 883(1), Sch. 1 para. 588(b) (with Sch. 2)

F262 Words in s. 180(5)(d) substituted (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 1 para. 551 (with Sch. 2 Pts. 1, 2)

Calculation of amount of interest at official rate U.K.

181 The official rate of interest U.K.

(1) “The official rate of interest” for the purposes of this Chapter means the rate applicable under section 178 of FA 1989 (general power of Treasury to specify rates of interest).

(2) Regulations under that section may make different provision in relation to a loan if—

(a) it was made in the currency of a country or territory outside the United Kingdom, and

(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.

182 Normal method of calculation: averaging U.K.

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—

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.

183 Alternative method of calculation U.K.

(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 [F18 an officer of Revenue and Customs] so [F263 requires] , by notice to the employee, or

(b) if the employee so elects, by notice to [F18 an 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.

Textual Amendments

F18 Words in Act substituted (18.4.2005) by Commissioners for Revenue and Customs Act 2005 (c. 11), s. 53(1), Sch. 4 para. 102(1); S.I. 2005/1126, art. 2(2)(h)

F263 Word in s. 183(1)(a) substituted (18.4.2005) by Commissioners for Revenue and Customs Act 2005 (c. 11), s. 53(1), Sch. 4 para. 110; S.I. 2005/1126, art. 2(2)(h)

Supplementary provisions relating to taxable cheap loans U.K.

184 Interest treated as paid U.K.

(1) This section applies where [F264 —

(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 [F265 the 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).]

(4) The interest is to be treated—

(a) as accruing during the period in the tax year during which the employee holds the employment and the loan is outstanding, and

(b) as paid by the employee at the end of the period.

(5) The interest is not to be treated—

(a) as income of the person making the loan, or

(b) as relevant loan interest to which section 369 of ICTA applies (mortgage interest payable under deduction of tax).

Textual Amendments

F264 Words in s. 184(1) substituted (with effect in accordance with Sch. 2 para. 62 of the amending Act) by Finance Act 2017 (c. 10), Sch. 2 para. 46

F265 Words in s. 184(3) substituted (with effect in accordance with s. 13(4) of the amending Act) by Finance Act 2015 (c. 11), Sch. 1 para. 11

185 Apportionment of cash equivalent in case of joint loan etc. U.K.

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—

(a) the cash equivalent of the benefit of the loan (determined in accordance with the provisions of this Chapter) is to be apportioned between them in a just and reasonable manner, and

(b) the portion allocated to each employee is to be treated as the cash equivalent of the benefit of the loan so far as that employee is concerned.

186 Replacement loans U.K.

(1) This section applies where an employment-related loan (“the original loan”) is replaced, directly or indirectly, by—

(a) a further employment-related loan, or

(b) a loan which is not an employment-related loan but which in turn is, in the same tax year or within 40 days after the end of the tax year, replaced, directly or indirectly, by a further employment-related loan.

(2) In such a case, for the purposes of calculating the cash equivalent of the benefit of the original loan under section 175(3), section 182 (normal method of calculating interest at the official rate) applies as if the replacement loan, or each of the replacement loans, were the same loan as the original loan.

(3) Where section 182 is applied as modified by subsection (2) then for the purposes of section 175(3)(b) the amount of interest actually paid on the loan for the tax year in question is the total of—

(a) the amount of interest actually paid on the original loan for that year, and

(b) the amount of interest actually paid on the replacement loan or on each of the replacement loans for that year.

(4) In this section a “further employment-related loan” means a loan which is an employment-related loan made in relation to—

(a) 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.

187 Aggregation of loans by close company to director U.K.

(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 [F18 an officer of Revenue and Customs] , and

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

Textual Amendments

F18 Words in Act substituted (18.4.2005) by Commissioners for Revenue and Customs Act 2005 (c. 11), s. 53(1), Sch. 4 para. 102(1); S.I. 2005/1126, art. 2(2)(h)

Loan released or written off U.K.

188 Loan released or written off: amount treated as earnings U.K.

(1) If—

(a) the whole or part of an employment-related loan is released or written off in a tax year, and

(b) at the time when it is released or written off the employee holds the employment in relation to which the loan is an employment-related loan (“employment E”),

the amount released or written off is to be treated as earnings from the employment for that year.

(2) But if the employment has terminated or become [F266 lower-paid employment as a minister of religion] and there was a time when—

(a) the whole or part of the loan was outstanding,

(b) the employee held the employment, and

(c) it was not [F266 lower-paid employment as a minister of religion],

subsection (1) applies as if the employment had not terminated or become [F266 lower-paid employment as a minister of religion] .

(3) Where subsection (2) applies, any loan which replaces directly or indirectly the employment-related loan is to be treated as an employment-related loan in relation to employment E if—

(a) it would, if employment E had not terminated or become [F267 lower-paid employment as a minister of religion], have been an employment-related loan in relation to employment E, and

(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).

Textual Amendments

F266 Words in s. 188(2) substituted (with effect in accordance with s. 13(4) of the amending Act) by Finance Act 2015 (c. 11), Sch. 1 para. 12(2)

F267 Words in s. 188(3)(a) substituted (with effect in accordance with s. 13(4) of the amending Act) by Finance Act 2015 (c. 11), Sch. 1 para. 12(3)

189 Exception where double charge U.K.

(1) Section 188 (loan released or written off: amount treated as earnings) does not apply if, by virtue of any other provision of the Income Tax Acts, the amount released or written off—

(a) is employment income of the employee, or

(b) is or is treated as income of the employee (or of the employee as a borrower) which is not employment income and upon which that person is liable to pay income tax.

This is subject to subsections (2) and (3).

(2) If, as a result of subsection (1), Chapter 3 of Part 6 (payments and benefits on termination of employment etc.) would be the only provision by virtue of which the amount released or written off would be income of the employee—

(a) section 188 does apply, and

(b) accordingly Chapter 3 of Part 6 does not apply.

(3) If—

(a) an amount is treated as the employee’s income under [F268 section 633 of ITTOIA 2005 (capital sums paid to settlor by trustees of settlement)] in respect of a capital sum paid in relation to the release or writing-off of the loan, and

(b) the amount released or written off exceeds the amount so treated as income,

section 188 does apply but only the amount of the excess is to be treated as earnings from the employment for the tax year in question under that section.

Textual Amendments

F268 Words in s. 189(3)(a) substituted (6.4.2005) by Income Tax (Trading and Other Income) Act 2005 (c. 5), s. 883(1), Sch. 1 para. 589 (with Sch. 2)

General supplementary provisions U.K.

190 Exclusion of charge after death of employee U.K.

(1) On the employee’s death a taxable cheap loan is to be treated—

(a) for the purposes of this Chapter as ceasing to be outstanding, and

(b) for the purposes of section 182 (normal method of calculating interest at the official rate) as being discharged on the date of death.

(2) Section 188 (loan released or written off: amount treated as earnings) does not apply in relation to a release or writing off which takes effect on or after the death of the employee.

191 Claim for relief to take account of event after assessment U.K.

(1) A claim may be made for relief in the following cases.

(2) The first case is where—

(a) the tax payable by an employee for a tax year in respect of a loan has been decided on the basis that, for the purposes of section 175 (benefit of taxable cheap loan treated as earnings), the whole or part of the interest payable on the loan for that year was not paid, and

(b) it is subsequently paid.

(3) The second case is where—

(a) the tax payable by an employee for a tax year in respect of a loan has been decided on that basis that, for the purposes of section 188 (loan released or written off: amount treated as earnings), the loan has been released or written off in that year, and

(b) the whole or part of the loan is subsequently repaid.

(4) The third case is where—

(a) 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.

F269 Chapter 8 U.K. Taxable benefits: notional loans in respect of acquisitions of shares

Textual Amendments

F269 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 U.K.

192 Application of this Chapter U.K.

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

Acquisition of shares for less than market value U.K.

193 Notional loan where acquisition for less than market value U.K.

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

194 The amount of the notional loan U.K.

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

195 Discharge of notional loan: amount treated as earnings U.K.

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

Supplementary provisions U.K.

196 Effects on other income tax charges U.K.

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

197 Minor definitions U.K.

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

F270 Chapter 9 U.K. Taxable benefits: disposals of shares for more than market value

Textual Amendments

F270 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)

198 Shares to which this Chapter applies U.K.

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

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

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

200 Minor definitions U.K.

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

Chapter 10 U.K. Taxable benefits: residual liability to charge

Introduction U.K.

201 Employment-related benefits U.K.

(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—

  (a)

  for an employee, or

  (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.

202 Excluded benefits U.K.

(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).

[F271 (1A) 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.

Textual Amendments

F271 S. 202(1A) inserted (with effect in accordance with Sch. 2 para. 62 of the amending Act) by Finance Act 2017 (c. 10), Sch. 2 para. 47

Cash equivalent of benefit treated as earnings U.K.

203 Cash equivalent of benefit treated as earnings U.K.

(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 [F272 , 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.

Textual Amendments

F272 Words in s. 203(2) substituted (with effect in accordance with s. 1(14) of the amending Act) by Finance (No. 2) Act 2017 (c. 32), s. 1(13)

[F273 203A Employment-related benefit provided under optional remuneration arrangements U.K.

(1) Where an employment-related benefit is provided pursuant to optional remuneration arrangements—

(a) the relevant amount is to be treated as earnings from the employment for the tax year in which the benefit is provided, and

(b) section 203(1) does not apply.

(2) To find the relevant amount, first determine which (if any) is the greater of—

(a) the cost of the employment-related benefit, and

(b) the amount foregone with respect to the benefit (see section 69B).

(3) If the cost of the employment-related benefit is greater than or equal to the amount foregone, the “relevant amount” is the cash equivalent (see section 203(2)).

(4) Otherwise, the “relevant amount” is—

(a) the amount foregone with respect to the employment-related benefit, less

(b) any part of the cost of the benefit made good by the employee, to the persons providing the benefit, on or before 6 July following the tax year in which it is provided.

(5) For the purposes of subsections (2) and (3), assume that the cost of the employment-related benefit is zero if the condition in subsection (6) is met.

(6) 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).]

Textual Amendments

F273 S. 203A inserted (with effect in accordance with Sch. 2 para. 62 of the amending Act) by Finance Act 2017 (c. 10), Sch. 2 para. 48

Determination of the cost of the benefit U.K.

204 Cost of the benefit: basic rule U.K.

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 U.K.

(1) The cost of an employment-related benefit (“the taxable benefit”) is determined in accordance with this section if—

[F274 (a) the benefit consists in an asset being made available for private use, and]

(b) there is no transfer of the property in the asset.

[F275 (1A) In this section and section 205A, “private use” means private use by the employee or a member of the employee's family or household.

(1B) For the purposes of subsection (1) and sections 205A and 205B, an asset made available in a tax year for use by the employee or a member of the employee's family or household is to be treated as made available throughout the year for private use unless—

(a) at all times in the year when it is available for use by the employee or a member of the employee's family or household, the terms under which it is made available prohibit private use, and

(b) no private use is made of it in the year.

(1C) The cost of the taxable benefit is—

(a) the annual cost of the benefit determined in accordance with subsection (2), less

(b) any amount required to be deducted by section 205A (deduction for periods when asset unavailable for private use).

(1D) In certain cases, the cost of the taxable benefit is calculated under this section in accordance with section 205B (reduction of cost of taxable benefit where asset is shared).]

(2) The [F276 annual cost of the] benefit is the higher of—

(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—

(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 benefit).

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 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 asset.

[F277 (5) 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.]

Textual Amendments

F274 S. 205(1)(a) substituted (with effect in accordance with s. 8(5) of the amending Act) by Finance Act 2017 (c. 10), s. 8(2)(a)

F275 S. 205(1A)-(1D) inserted (with effect in accordance with s. 8(5) of the amending Act) by Finance Act 2017 (c. 10), s. 8(2)(b)

F276 Words in s. 205(2) substituted (with effect in accordance with s. 8(5) of the amending Act) by Finance Act 2017 (c. 10), s. 8(2)(c)

F277 S. 205(5)(6) inserted (with effect in accordance with s. 9(5) of the amending Act) by Finance Act 2019 (c. 1), s. 9(4)

Modifications etc. (not altering text)

C7 S. 205 modified (12.2.2019) by Finance Act 2019 (c. 1), s. 9(6)-(8)

[F278 205A Deduction for periods when asset unavailable for private use U.K.

(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.

Textual Amendments

F278 Ss. 205A, 205B inserted (with effect in accordance with s. 8(5) of the amending Act) by Finance Act 2017 (c. 10), s. 8(3)

Modifications etc. (not altering text)

C8 S. 205A modified (12.2.2019) by Finance Act 2019 (c. 1), s. 9(6)-(8)

205B Reduction of cost of taxable benefit where asset is shared U.K.

(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.]

Textual Amendments

F278 Ss. 205A, 205B inserted (with effect in accordance with s. 8(5) of the amending Act) by Finance Act 2017 (c. 10), s. 8(3)

206 Cost of the benefit: transfer of used or depreciated asset U.K.

(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 [F279 an 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).

[F280 (6) 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.]

Textual Amendments

F279 Words in s. 206(3)(a) substituted (with effect in accordance with s. 17(4) of the amending Act) by Finance Act 2005 (c. 7), s. 17(2)

F280 S. 206(6) inserted (with effect in accordance with s. 17(4) of the amending Act) by Finance Act 2005 (c. 7), s. 17(3)

Supplementary provisions U.K.

207 Meaning of “annual rental value” U.K.

(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

(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 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 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 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 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 land or of any other land.

208 Meaning of “market value” U.K.

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.

209 Meaning of “persons providing benefit” U.K.

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

210 Power to exempt minor benefits U.K.

(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 U.K.

211 Special rules for scholarships: introduction U.K.

(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 [F281 section 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.

Textual Amendments

F281 Words in s. 211(2) substituted (with effect in accordance with s. 381(1) of the amending Act) by Taxation (International and Other Provisions) Act 2010 (c. 8), s. 381(1), Sch. 8 para. 298 (with Sch. 9 paras. 1-9, 22)

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

(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).

213 Exception for certain scholarships under trusts or schemes U.K.

(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.

214 Scholarships: cost of the benefit U.K.

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.

215 Limitation of exemption for scholarship income in [F282 section 776(1) of ITTOIA 2005] U.K.

If an employment-related benefit consists in the provision of a scholarship, [F283 section 776(1) of ITTOIA 2005] (exemption for scholarship income) applies only in relation to the holder of the scholarship.

Textual Amendments

F282 Words in s. 215 heading substituted (with effect in accordance with s. 381(1) of the amending Act) by Taxation (International and Other Provisions) Act 2010 (c. 8), s. 381(1), Sch. 8 para. 299 (with Sch. 9 paras. 1-9, 22)

F283 Words in s. 215 substituted (6.4.2005) by Income Tax (Trading and Other Income) Act 2005 (c. 5), s. 883(1), Sch. 1 para. 590 (with Sch. 2)

F284 Chapter 11 U.K. Taxable benefits: exclusion of lower-paid employments from parts of benefits code

Textual Amendments

F284 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 U.K.

216 Provisions not applicable to lower-paid employments U.K.

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

What is lower-paid employment U.K.

217 Meaning of “lower-paid employment” U.K.

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

218 Calculation of earnings rate for a tax year U.K.

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

219 Extra amounts to be added in connection with a car U.K.

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

Treatment of related employments U.K.

220 Related employments U.K.

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

Chapter 12 U.K. [F285 Other amounts] treated as earnings

Textual Amendments

F285 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

[F286 Payments] U.K.

Textual Amendments

F286 S. 221 cross-heading inserted (1.9.2013) by Finance Act 2013 (c. 29), Sch. 23 paras. 4(b), 38; S.I. 2013/1755, art. 2

221 Payments where employee absent because of sickness or disability U.K.

(1) This section applies if—

(a) an employee is absent from work because of sickness or disability, and

(b) a qualifying sickness payment is made in respect of the employee’s absence from work.

(2) But this section does not apply if the qualifying sickness payment constitutes earnings from the employment by virtue of any other provision.

(3) The qualifying sickness payment is to be treated as earnings from the employment in respect of the period of absence.

(4) If the qualifying sickness payment is made from funds to which the employer and the employer’s employees have made contributions, only the amount of the payment which it is just and reasonable to attribute to the employer’s contributions is treated as earnings under this section.

(5) In this section “qualifying sickness payment” means a payment which meets conditions A and B.

(6) Condition A is that the payment is made—

(a) to the employee or to a member of the employee’s family,

(b) to the order of such a person, or

(c) to the benefit of such a person.

(7) Condition B is that the payment is made—

(a) by reason of the employment, and

(b) as a result of arrangements entered into by the employer.

222 Payments by employer on account of tax where deduction not possible U.K.

(1) This section applies if—

(a) an employer is treated by virtue of sections 687, [F287 687A,] 689 [F288 , 689A] and 693 to 700 as having made a payment of income of an employee (“the notional payment”),

(b) the employer is required by virtue of section 710(4) to account to [F18 an officer of Revenue and Customs] for an amount of income tax (“the due amount”) in respect of the notional payment, and

(c) the employee does not, before the end of the period of [F289 90 days] [F290 after the end of the tax year in which the relevant date falls], make good the due amount to the employer.

(2) The due amount is to be treated as earnings from the employment for the tax year in which the [F291 relevant date] falls.

(3) In this section “employer”, in relation to any provision of sections 687, [F292 687A,] 689, 693 to 700 or 710, means the person taken to be the employer for the purposes of that provision.

It also includes a person who is treated as making a payment of PAYE income by virtue of section 689(2) (payments by person for whom employee works but who is not the employer) [F293 or section 689A(3) (deemed payments of PAYE income of continental shelf workers by person other than employer)] .

[F294 (4) In this section “the relevant date” means—

(a) if the employer is treated by virtue of any Act as making the notional payment before the date on which the Act is passed, that date, and

(b) in any other case, the date on which the employer is treated as making the notional payment.]

Textual Amendments

F18 Words in Act substituted (18.4.2005) by Commissioners for Revenue and Customs Act 2005 (c. 11), s. 53(1), Sch. 4 para. 102(1); S.I. 2005/1126, art. 2(2)(h)

F287 Word in s. 222(1)(a) inserted (with effect in accordance with Sch. 2 paras. 52-59 of the amending Act) by Finance Act 2011 (c. 11), Sch. 2 para. 10

F288 Word in s. 222(1)(a) inserted (6.4.2014) by Finance Act 2014 (c. 26), s. 21(2)(a)(10)

F289 Words in s. 222(1)(c) substituted (with effect in accordance with s. 144(2) of the amending Act) by Finance Act 2003 (c. 14), s. 144(1)

F290 Words in s. 222(1)(c) substituted (with effect in accordance with s. 19(2) of the amending Act) by Finance Act 2014 (c. 26), s. 19(1)

F291 Words in s. 222(2) substituted (with effect in accordance with s. 94(5) of the amending Act) by Finance Act 2006 (c. 25), s. 94(2)(b); S.I. 2007/1081, art. 2

F292 Word in s. 222(3) inserted (with effect in accordance with Sch. 2 paras. 52-59 of the amending Act) by Finance Act 2011 (c. 11), Sch. 2 para. 10

F293 Words in s. 222(3) inserted (6.4.2014) by Finance Act 2014 (c. 26), s. 21(2)(b)(10)

F294 S. 222(4) inserted (with effect in accordance with s. 94(5) of the amending Act) by Finance Act 2006 (c. 25), s. 94(2)(c); S.I. 2007/1081, art. 2

Modifications etc. (not altering text)

C9 S. 222 modified (6.4.2007) by The Finance Act 2006 (Section 94(5)) (PAYE: Retrospective Notional Payments — Appointment of Substituted Date) Order 2007 (S.I. 2007/1081), art. 2; as provided for by 2006 c. 25, s. 94(5)

223 Payments on account of director’s tax other than by the director U.K.

(1) This section applies if in a tax year—

(a) a person (“P”) makes a payment to another person who is employed as the director of a company,

(b) the payment is of, or on account of, earnings from the director’s employment,

(c) PAYE regulations require P to deduct an amount of income tax (“the deductible tax”),

(d) P deducts none, or only some, of the deductible tax, and

(e) either or both of the following occur—

(i) P accounts to [F295 the Commissioners for Her Majesty’s Revenue and Customs] for some or all of the deductible tax (whether or not P has actually deducted the amount accounted for);

(ii) one or more persons other than P (apart from the director) account to [F295 the Commissioners for Her Majesty’s Revenue and Customs] for some or all of the deductible tax.

(2) For the purposes of this section it does not matter whether the director’s employment is held at the time when P makes the payment mentioned in subsection (1)(a) so long as it is held at some point in the tax year in which the payment is made.

(3) References in this section to employment as a director accordingly include prospective or past employment as a director.

(4) The deductible tax accounted for to [F295 the Commissioners for Her Majesty’s Revenue and Customs] is to be treated as earnings of the director from the director’s employment for the tax year in which it is accounted for.

(5) But if—

(a) the deductible tax is accounted for after the director’s employment has ceased, and

(b) the employment ceased in a tax year before the one in which the deductible tax is accounted for,

the deductible tax is treated as earnings for the tax year in which the director’s employment ceased.

(6) The following rules apply to the calculation of the amount to be treated as earnings under this section—

(a) any amount accounted for after the death of the director is to be disregarded;

(b) if P deducts some of the deductible tax, the amount treated as earnings is reduced by the amount deducted;

(c) if the director makes good to P or to another person some or all of the deductible tax which P or the other person accounts for, the amount treated as earnings is reduced by the amount made good.

(7) This section does not apply if the director has no material interest in the company and either—

(a) the director is employed as a full-time working director of the company, or

(b) the company is—

(i) non-profit-making, or

(ii) [F296 a charitable company] .

(8) In this section—

• “director” has the same meaning as in the benefits code (see section 67);

• “director’s employment”, in relation to a person who is employed as a director, means that employment;

• “full-time working director” has the same meaning as in the benefits code (see section 67);

• “material interest” has the same meaning as in the benefits code (see section 68);

• “non-profit-making”, in relation to a company, means that—

  (a)

  the company does not carry on a trade, and

  (b)

  its functions do not consist wholly or mainly in the holding of investments or other property.

Textual Amendments

F295 Words in Act substituted (18.4.2005) by Commissioners for Revenue and Customs Act 2005 (c. 11), s. 53(1), Sch. 4 para. 102(2); S.I. 2005/1126, art. 2(2)(h)

F296 Words in s. 223(7)(b)(ii) substituted (coming into force for the tax year 2012-13 and subsequent tax years) by Finance Act 2010 (c. 13), Sch. 6 paras. 17(4), 34(2); S.I. 2012/736, art. 13

F297 224 Payments to non-approved personal pension arrangements U.K.

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

Textual Amendments

F297 S. 224 repealed (6.4.2006) by Finance Act 2004 (c. 12), Sch. 42 Pt. 3 (with Sch. 36)

225 Payments for restrictive undertakings U.K.

(1) This section applies where—

(a) an individual gives a restrictive undertaking in connection with the individual’s current, future or past employment, and

(b) a payment is made in respect of—

(i) the giving of the undertaking, or

(ii) the total or partial fulfilment of the undertaking.

(2) It does not matter to whom the payment is made.

(3) The payment is to be treated as earnings from the employment for the tax year in which it is made.

(4) Subsection (3) does not apply if the payment constitutes earnings from the employment by virtue of any other provision.

(5) A payment made after the death of the individual who gave the undertaking is treated for the purposes of this section as having been made immediately before the death.

[F298 (6) This section applies only if—

(a) section 15 applies to any general earnings from the employment, and would apply even if the individual made a claim under section 809B of ITA 2007 (claim for remittance basis) for the tax year mentioned in subsection (3), or

(b) section 27 (UK-based earnings of non-UK resident employee) applies to any general earnings from the employment.]

(8) In this section “restrictive undertaking” means an undertaking which restricts the individual’s conduct or activities.

For this purpose it does not matter whether or not the undertaking is legally enforceable or is qualified.

Textual Amendments

F298 S. 225(6) substituted for s. 225(6)(7) (with effect in accordance with Sch. 7 para. 81 of the amending Act) by Finance Act 2008 (c. 9), Sch. 7 para. 24

226 Valuable consideration given for restrictive undertakings U.K.

(1) In a case where—

(a) an individual gives a restrictive undertaking in connection with the individual’s current, future or past employment, and

(b) valuable consideration that is not in the form of money is provided in respect of—

(i) the giving of the undertaking, or

(ii) the total or partial fulfilment of the undertaking,

section 225 applies as it would if a payment of an amount equal to the value of the consideration had been made instead.

(2) For this purpose—

(a) merely assuming an obligation to make over or provide valuable property, rights or advantages is not valuable consideration, but

(b) wholly or partially discharging such an obligation is.

[F299 Shares of employee shareholders U.K.

Textual Amendments

F299 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

226A Amount treated as earnings U.K.

(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 [F300 equal 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).

F301 (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(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 F302 ...—

• 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) [F303 (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).]

Textual Amendments

F300 Words in s. 226A(2) substituted (with effect in accordance with s. 12(5)-(7) of the amending Act) by Finance Act 2017 (c. 10), s. 12(1)(a)

F301 S. 226A(3) omitted (with effect in accordance with s. 12(5)-(7) of the amending Act) by virtue of Finance Act 2017 (c. 10), s. 12(1)(b)

F302 Words in s. 226A(6) omitted (with effect in accordance with s. 12(5)-(7) of the amending Act) by virtue of Finance Act 2017 (c. 10), s. 12(1)(c)

F303 Words in s. 226A(7) inserted (with effect in accordance with s. 12(5)-(7) of the amending Act) by Finance Act 2017 (c. 10), s. 12(1)(d)

F304 226B Deemed payment for employee shareholder shares U.K.

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

Textual Amendments

F304 Ss. 226B-226D omitted (with effect in accordance with s. 12(5)-(7) of the amending Act) by virtue of Finance Act 2017 (c. 10), s. 12(2)

F304 226C Only one payment deemed to be made under associated agreements U.K.

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

Textual Amendments

F304 Ss. 226B-226D omitted (with effect in accordance with s. 12(5)-(7) of the amending Act) by virtue of Finance Act 2017 (c. 10), s. 12(2)

F304 226D Shareholder or connected person having material interest in company U.K.

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

Textual Amendments

F304 Ss. 226B-226D omitted (with effect in accordance with s. 12(5)-(7) of the amending Act) by virtue of Finance Act 2017 (c. 10), s. 12(2)

[F305 Sporting testimonial payments U.K.

Textual Amendments

F305 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

226E Sporting testimonial payments U.K.

(1) This section applies in relation to an individual who is or has been employed as a professional sportsperson (“S”).

(2) In this section “sporting testimonial” means—

(a) a series of relevant events or activities which each have the same controller, or

(b) a single relevant event or activity not forming part of such a series.

(3) An event or activity is (subject to subsection (4)(b)) a relevant event or activity if—

(a) its purpose (or one of its purposes) is to raise money for or for the benefit of S, and

(b) the only or main reason for doing that is to recognise S's service as a professional sportsperson who is or has been employed as such.

(4) An activity that meets the conditions in subsection (3)(a) and (b) and consists solely of inviting and collecting donations for or for the benefit of S—

(a) is a relevant activity if it is one of a series of relevant events or activities for the purposes of subsection (2)(a), but

(b) is not a relevant activity for the purposes of subsection (2)(b) so long as both conditions in subsection (5) are met while the activity takes place.

(5) The conditions are—

(a) 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—

(i) S,

(ii) a person who is (or has been) the controller of any other relevant event or activity for or for the benefit of S,

(iii) a person connected with S or a person mentioned in sub-paragraph (ii),

(iv) a person acting for or on behalf of a person mentioned in sub-paragraphs (i) to (iii), and

(b) that the donations collected do not include any sums paid (directly or indirectly) out of money raised by any other relevant event or activity.

(6) A “sporting testimonial payment” is a payment made by (or on behalf of) the controller of a sporting testimonial out of money raised for or for the benefit of S which—

(a) is made to S, to a member of S's family or household, to a prescribed person, to S's order or otherwise for S's benefit, and

(b) does not (apart from this section) constitute earnings from an employment.

(7) A sporting testimonial payment is to be treated as earnings of S from the employment or former employment to which the sporting testimonial is most closely linked.

(8) For the purposes of this section if at any material time S is dead—

(a) anything done for or for the benefit of S's estate is to be regarded as done for or for the benefit of S; and

(b) a payment made to S's personal representatives or to their order is to be treated as a payment to S or to S's order.

(9) 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.]