SE15120 - Non-approved retirement benefits schemes: non-cash benefits received

Section 612(1) ICTA 1988 and Section 596B & C ICTA 1988

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.

Section 596A(4)(b) ICTA 1988 imposes a charge on the “cash equivalent” of such benefits.

The calculation of a “cash equivalent” is dealt with by Section 596B ICTA 1988. This uses the computational rules of Chapter II Part V ICTA 1988 in the same way that they are used for payments and benefits received on or after 6 April 1998 and chargeable under Section 148 ICTA 1988 (see SE13300 and SE13310).

The “cash equivalent” of a beneficial loan is treated as a payment of interest (Section 596C ICTA 1988). This means that it can be claimed as a relief. The rules are the same as in SE26101 onwards (except that Section 596C ICTA 1988 applies to all employees). When the figure for notional interest has been calculated, the same rules as in SE26270 apply to give relief for it.

If the scheme provides only for non-cash benefits, Section 596A ICTA 1988 will not apply. This is because the Section can only apply to benefits that come from a scheme that includes “relevant benefits” (which means cash).