SE13255 - Termination payments and benefits: non-cash benefits received before 6 April 1998

Section 148 ICTA 1988(3) & (4) ICTA 1988 as enacted before FA 1998

This instruction deals only with non-cash benefits received before 6 April 1998 (for benefits received on or after that date seeSE13270). To determine when a non-cash benefit is “received” see SE13110.

For such benefits, Section 148 ICTA 1988 applies to any “valuable consideration other than money” given at termination. Examples of such “valuable consideration” are:

• the transfer of an asset such as a car or a house to the employee or
• the promise to provide non-cash benefits to the ex-employee for a period following termination of employment, such as the use of a car owned by the former employer.

Section 148 ICTA 1988(3) ICTA 1988 (as enacted prior to Section 58 FA 1998) treats the value of such assets and promises as payments of money given to the employee. So a car worth £10,000 which is given to the employee on termination of employment is treated in the same way as a money payment of £10,000 would be.

Similarly, the value of the promise to provide the use of a car for 18 months following termination is treated as a payment of money equal to that value. That value would be calculated by looking at what it would cost the employee to hire or lease an equivalent vehicle for the period promised. The “cash equivalent” ( SE13270) does not apply. Whilst the “cost to the employer” will be an acceptable approximation to the correct charge where the employer leases or hires the asset, it will often not be so (particularly where the asset has appreciated since acquisition by the employer).

Note that the actual provision of the use of the car is not assessable. The assessment of the value of the promise is the only charge under these rules.

See the example at example SE13945