SE03136 - removal or transfer costs: relocation companies - guaranteed sale price schemes - property not sold to employer nor to relocation company - example

Schedule 11A ICTA 1988

Example 4: Property not sold to employer nor to the relocation company

Facts

The employee joins the guaranteed sale price scheme on 1 September 1998.

He gives the relocation company authority to sell the property on his behalf and receives the guaranteed sale price of £90,000 on 1 October 1998. He does not enter a binding contract to sell the property to the relocation company.

The property is sold to a third party on 1 January 1999 for £80,000.

The employer is responsible for meeting the relocation company's interest costs and for making good any shortfall when the property is sold on.

Comment

Since the employee has not contracted to sell the property to the relocation company it follows that the receipt of the guaranteed sale price in October 1998 is not the receipt of sale proceeds, but a loan chargeable under Section 160 ICTA 1988. The amount of the benefit is calculated in accordance with the rules at SE26101 onwards. It may be eligible for exemption or reduction if the conditions at SE03122 are met.

The shortfall payment and management fee are taxable as chargeable benefits. ESC A85 ( SE03127 and SE21662) does not apply because the opportunity to sell does not arise from the employment.

If the employer funds the employee's legal and other selling costs of the property they will be eligible for exemption if the conditions in SE03104 onwards are satisfied.