EIM15205 - Non-approved and employer-financed retirement benefits schemes: example: non-cash receipts

On 1 July 2005, a company marks a director’s retirement by giving him a car valued at £25,000. The receipt falls before 6 April 2006 so the rules relating to non-approved schemes apply and not the rules relating to employer-financed schemes (see EIM15010).

The receipt is in non-cash form and so is not a “relevant benefit” for that purpose (see EIM15021 and EIM15120). It follows that the receipt is not from a non-approved “retirement benefits scheme” as defined in EIM15020. So no charge under s394 ITEPA 2003 arises.

If, as well as giving the car, the employer gave cash, then the scheme would include a “relevant benefit” – because the cash is a lump sum given on retirement (see the definition in EIM15020). Because the scheme includes a “relevant benefit” (the cash lump sum) it is within the definition of a non-approved retirement benefits scheme. It follows that Section 394 ITEPA 2003 taxes both the cash and the value of the car (see EIM15120 for guidance on determining that value).

On 1 September 2006 another director retires and again the company marks this event by giving her a car valued at £30,000. The receipt falls after 5 April 2006 so the rules relating to employer- financed schemes apply and not the rules relating to non-approved schemes (see EIM15010). The definition of “relevant benefits” for that purpose includes non-cash benefits such as this (see EIM15021) so the value of the car is within Section 394 ITEPA 2003 (as amended by s249(3) FA 2004).