Finance Act 2017

Benefits in kind: amount treated as earnings

23 After section 121 insert—

“121A Optional remuneration arrangements: method of calculating relevant amount

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

• Step 1

  Take the amount foregone with respect to the benefit of the car for the tax year.

• 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 “amount foregone” under step 1 of subsection (1), to apportion an amount of earnings to the benefit of the car 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).

121B Meaning of “modified cash equivalent”

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

• Step 1

  Find the price of the car in accordance with sections 122 to 124A.

• Step 2

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

  The resulting amount is the interim sum.

• Step 3

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

• Step 4

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

• Step 5

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

  The resulting amount is the modified cash equivalent of the benefit of the car for the year.

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

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

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

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

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

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