154A Benefit of van treated as earnings: optional remuneration arrangements
(1) Where this Chapter applies to a van in relation to a particular tax year and the conditions in subsection (2) are met—
(a) the relevant amount is to be treated as earnings from the employment for that tax year, and
(b) section 154(1) does not apply.
In such a case (including a case where the relevant amount is nil) the employee is referred to in this Chapter as being chargeable to tax in respect of the van in the tax year.
(2) The conditions are that—
(a) the van is made available to the employee or member of the employee's household pursuant to optional remuneration arrangements, and
(b) 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—
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 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).
(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.
(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 2020-21, the cash equivalent is the appropriate percentage of £3,500 ...
(aa) if the van cannot in any circumstances emit CO2 by being driven and the tax year is 2021-22 or a subsequent tax year, the cash equivalent is nil, and
(b) in any other case, the cash equivalent is £4,170.
(1C) The appropriate percentage for the purposes of subsection (1B)(a) is—
(a) 20% for the tax year 2015-16,
(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) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(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.
(1) The cash equivalent of the benefit of a van for a tax year under section 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—
UY×CE
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.
157 Reduction of cash equivalent where van is shared
(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.
(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.
(1) The cash equivalent of the benefit of a van for a tax year under section 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
(b) pays that amount on or before 6 July following that year.
(2) If the amount paid 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 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.
158A Van provided pursuant to optional remuneration arrangements: private use
(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.
159 Modification of provisions where van temporarily replaced
(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.
(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 or 154A , and
(c) the cash equivalent of the van for that year is that under 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.
(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(5) This section is subject to section 160A.
160A Benefit of van fuel treated as earnings: optional remuneration arrangements
(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).
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, £798.
(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 ...—
(a) 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 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)).
163 Van fuel: proportionate reduction of cash equivalent
(1) The cash equivalent of the benefit of the fuel is to be proportionately reduced if for any part of the tax year in question the van for which the fuel is provided is unavailable (within the meaning of section 156 (reduction for periods when van unavailable)).
(2) But if section 159 (van temporarily replaced) applies—
(a) section 160 applies as if the replacement van were the normal van, and
(b) for the purposes of subsection (1) the replacement van is to be treated as unavailable on the days during the period on which it replaces the normal van.
(3) The cash equivalent of the benefit of the fuel is also to be proportionately reduced if ...—
(a) 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) 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—
(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 , 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—
CE×Y-DY
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.
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.
(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.
(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
(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
(b) M's employment is lower-paid employment as a minister of religion.
(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
169A Van available to more than one member of family or household employed by same employer
(1) This section applies where—
(a) an employee (“E”) and a member of the employee’s family or household (“M”) are employed by the same employer, and
(b) as a result of a 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
(b) M's employment is lower-paid employment as a minister of religion.
(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1) The Treasury may by order substitute a greater amount for that for the time being specified in—
(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(b) section 126(3)(d) (car: minimum price of later accessory),
(c) section 132(3)(b) (car: maximum contributions deduction),
(ca) section 132A(5)(b) (corresponding provision with respect to optional remuneration arrangements),
(d) section 147(1)(b) (classic car: minimum value), ...
(e) section 147(7)(b) (classic car: maximum contributions deduction) , or
(f) section 147A(1)(b) (classic car: minimum value: optional remuneration arrangements).
(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 in tax years 2015-16 to 2020-21), ...
(ba) section 155(1B)(aa) (cash equivalent for zero-emissions vans in tax year 2021-22 and subsequent tax years), and
(c) section 155(1B)(b) (cash equivalent in other cases).
(2) An order under subsection (1) or (1A) must specify the tax years to which it applies.
(2A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(4) The Treasury may by regulations provide for the value of the appropriate percentage as determined under sections 139 to 141 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) 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.
(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 within the meaning of—
Council Directive 70/156/EEC,
Directive 2007/46/EC of the European Parliament and of the Council of 5 September 2007, or
Regulation (EU) 2018/858 of the European Parliament and of the Council of 30 May 2018 on the approval and market surveillance of motor vehicles and their trailers, and of systems, components and separate technical units intended for such vehicles;
“EC type-approval certificate” means—
a type-approval certificate issued under any provision of the law of a Member State implementing Council Directive 70/156/EEC,
an EC type-approval certificate within the meaning of Council Directive 2007/46/EC, or
an EU type-approval certificate within the meaning of Regulation (EU) 2018/858 of the European Parliament and of the Council of 30 May 2018 on the approval and market surveillance of motor vehicles and their trailers, and of systems, components and separate technical units intended for such vehicles;
“qualifying emissions certificate” has the same meaning as in CAA 2001 (see section 268C(1) of that Act);
“relevant taxes” means any car tax, any value added tax, any customs or excise duty and any tax chargeable as if it were a customs duty;
“road fuel gas” means any substance which is gaseous at a temperature of 15°C and under a pressure of 1013.25 millibars, and which is for use as fuel in road vehicles;
“UK approval certificate” means—
a certificate issued under—
section 58(1) or (4) of the Road Traffic Act 1988, or
Article 31A(4) or (5) of the Road Traffic (Northern Ireland) Order 1981 (S.I. 1981/154 (N.I. 1)), or
any other certificate or document issued in the United Kingdom on the basis of which a vehicle is first registered, other than an EC certificate of conformity or an EC type-approval certificate.
(2) In this Chapter references to the date of first registration in relation to a car ... 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 ... 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).
172 Minor definitions: equipment to enable a disabled person to use a car
(1) In section 125(2)(c) “equipment to enable a disabled person to use a car” means equipment—
(a) which is designed solely for use by a chronically sick or disabled person, or
(b) which is made available for use with the car because it enables a disabled employee to use the car in spite of the disability.
(2) In this section—
“disabled employee” means an employee who, at the time when the car is first made available to the employee, holds a disabled person’s badge, and
“the disability” means the disability entitling the disabled employee to hold the disabled person’s badge.
(1) This Chapter applies to a loan if it is an employment-related loan.
(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 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.
(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 first owner’s original beneficial interest minus such part of the aggregate payments made as does not represent alternative finance return, and
(c) in the case of arrangements to which section 564D of ITA 2007 or section 504 of CTA 2009 would apply assuming one of the parties were a first owner, as a reference to the amount of that party's original beneficial interest minus such part of the aggregate payments made as does not represent anything that would be alternative finance return on that assumption.
(4) In this section—
“alternative finance return” has the meaning given in sections 564I to 564L of ITA 2007 or sections 511 to 513 of CTA 2009, ...
“financial institution” has the meaning given in section 564B of ITA 2007 or section 502 of CTA 2009, and
“first owner” is to be construed in accordance with section 564D of ITA 2007 or section 504 of CTA 2009.
(5) This section does not apply to arrangements entered into before 22 March 2006.
(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 or civil partner ,
(b) a parent, child or remoter relation in the direct line either of Y or of Y’s spouse or civil partner ,
(c) a brother or sister of Y or of Y’s spouse or civil partner , or
(d) the spouse or civil partner of a person falling within paragraph (b) or (c).
175 Benefit of taxable cheap loan treated as earnings
(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).
175A Optional remuneration arrangements: “relevant amount” and “modified cash equivalent”
(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).
176 Exception for loans on ordinary commercial terms
(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
(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
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 or section 383 of ITA 2007 (relief for interest payments),
(b) would be eligible for relief under 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 to tax in respect of a trade, profession or vocation carried on 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 to tax in respect of a UK property business (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.
179 Exception for certain advances for necessary expenses
(1) An advance by an employer to an employee for the purpose of paying for—
(a) necessary expenses, or
(b) 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, an officer of Revenue and Customs is satisfied that there is good reason to do so in the case of a particular advance, 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 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)).
180 Threshold for benefit of loan to be treated as earnings
(1) Section 175 does not have effect in relation to an employee and a tax year—
(a) if the normal £10,000 threshold is not exceeded, or
(b) where the loan is a non-qualifying loan and that threshold is exceeded, if the £10,000 threshold for non-qualifying loans is not exceeded.
(2) The normal £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 £10,000.
(3) The £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 £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 or section 383 of ITA 2007 (relief for interest payments),
(b) would be eligible for relief under 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 to tax in respect of a trade, profession or vocation carried on 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 to tax in respect of a UK property business (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.
(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.
The normal method of calculating for the purposes of this Chapter the amount of interest that would be payable on a loan for a tax year at the official rate is as follows. Step 1
Calculate the average amount of the loan outstanding during the tax year—
1. Find the maximum amount of the loan outstanding on 5th April preceding the tax year or, if the loan was made in the tax year, on the date it was made.
2. Find the maximum amount outstanding on 5th April of the tax year or, if the loan was discharged in the tax year, on the date of discharge.
3. Add these amounts together and divide the result by 2.
Step 2
If the official rate of interest changed during the period in the tax year when the loan was outstanding, calculate the average official rate of interest for that period as follows—
1. Multiply each official rate of interest in force during the period by the number of days when it is in force.
2. Add these products together.
3. Divide the result by the number of days in the period.
Step 3
Calculate the amount of interest that would be payable on the loan for the tax year at the official rate as follows—
A
×
I
×
M
12
where—
A is the average amount of the loan outstanding during the tax year obtained from step 1,
I is the official rate of interest in force during the period in the tax year when the loan was outstanding or, if the official rate changed, the average official rate of interest obtained from step 2, and
M is the number of whole months during which the loan was outstanding in the year.
For this purpose a month begins on the sixth day of the calendar month.
(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 an officer of Revenue and Customs so requires , by notice to the employee, or
(b) if the employee so elects, by notice to 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.
(1) This section applies where —
(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 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).
185 Apportionment of cash equivalent in case of joint loan etc.
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.
(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
(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 an officer of Revenue and Customs , and
(b) before 7th July after the end of the tax year to which the election relates.
188 Loan released or written off: amount treated as earnings
(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 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 lower-paid employment as a minister of religion,
subsection (1) applies as if the employment had not terminated or become 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 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).
(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 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.
(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.