SE12014 – PAYE avoidance: no trading arrangements before 6 April 1998

Sections 203K ICTA1988

No trading arrangements before 6 April 1998

Before 6 April 1998, when an employer provided an employee with an asset, there was no inevitable requirement for the employer to operate PAYE. The asset was not a tradeable asset if there were no trading arrangements in place when it was provided.

For instance, the definition of trading arrangements required the employee to obtain an amount similar to the cost of providing the asset and “similar to” is defined as greater than, equal to or not substantially less than that expense.

If an employer provides an employee with a second hand asset, such as a car previously used in the business, it will not normally be a tradeable asset because the amount the employee could obtain for the asset (the second hand value) is probably substantially less than the employer paid for the asset.

Only if there are arrangements allowing the car to be sold at a value similar to its cost will the transfer of the car be subject to trading arrangements and the car itself a tradeable asset.