Expenses and benefits in kind: a guide to tax and NICs: how to operate the rules: how to work out the amount of a benefit that is taxable and liable for Class 1A NICs  

The general rule

The amount of a benefit that is taxable and liable for NICs is called the cash equivalent.

The general rule is that the cash equivalent is:

• the cost of providing the benefit
• less any part of that cost made good by the employee.

Meaning of made good

A benefit is made good when the employee gives something in return for the benefit that is of equal value. This will usually be in money, for example:

• direct payment
• a deduction from an employee's salary
• a debit to a director's current account in the employer's records.

It may also be in a form that can be measured in money, for example giving the employer valuable property. It cannot be done in a way that cannot be measured in money, for example by working extra hours without pay.

Exceptions to the general rule

There are different rules for valuing some benefits. You can find more detailed information about valuing these benefits by following the links below. The benefits are:

• car benefit and car fuel benefit
• van benefit
• beneficial loans
• living accommodation
• assets transferred to an employee
• assets placed at the disposal of an employee.

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