EIM15421 - Non-approved schemes: non-cash benefits received: treatment and valuation

Sections 398(2)-(6) and 399 ITEPA 2003

In addition to cash benefits in the form of a lump sum or pension, schemes may also provide non-cash benefits on or during retirement.

Non-cash benefits may take many forms. For example, the use of an asset may be provided, or a person may be given a loan at less than a commercial rate of interest.

The value of the benefit is the greater of:

  1. its money’s worth (see EIM00515), and
  2. its ‘cash equivalent’ under the benefits code (see EIM21006)

in both cases making the assumption that the benefit is received for performance of the duties of the employment. This is the same process as for termination benefits (see EIM13270 and EIM13310).

Note that when applying the benefits code for this purpose:

  • any reference to employer is to be taken as including a former employer
  • the same difference applies when calculating the cash equivalent of certain living accommodation as applies for the purposes of Section 401 ITEPA 2003 (see EIM13330).

The cash equivalent of a beneficial loan is treated as a payment of interest (Section 399(2) ITEPA 2003). This means that it can be claimed as a relief. The rules are the same as in EIM26101 onwards (except that Section 399 ITEPA 2003 applies to all employees). When the figure for notional interest has been calculated, the same rules as in EIM26270 apply to give relief for it.

Where a non-approved scheme provides only for non-cash benefits, Section 394 ITEPA 2003 will not apply (see EIM15403). This is because the Section can only apply to benefits that come from a scheme that includes relevant benefits (which meant cash only benefits before 6 April 2006).