Guide 480 Expenses and benefits

14 March 2019


An update has been made under the optional remuneration arrangements section in the employer Guide 480 (2019) Expenses and benefits.


Although new content and revisions are marked with a green line in the margin of the guide, it has not been made clear exactly what change has been made.


Section 5a on page 133 is the section which has been updated and reads as follows:


Example 5a


An employee has a car made available to them in the tax year 2019 to 2020 under the terms of an optional remuneration arrangement under which they give up £300 per month.


The car is first made available on 6 October 2019 and as in example 1 above, the employee also makes a capital contribution of £1,500 for a higher specification vehicle. The car has a list price of £20,000 and an appropriate percentage of 17%.


The modified cash equivalent of the car will be £1,700 (£20,000 x 17%) = £3,400 less deduction for unavailability.


The availability factor here is 0.5 (366-183/366) £3,400 x 0.5 = £1,700.


The modified cash equivalent is then compared to the amount foregone £1,800 (£300 x 6 months). The amount foregone is greater than the modified cash equivalent (£1,700) and so £1,800 is used to determine the relevant amount.


The relevant amount to treat as earnings is £1,800 minus £128 (capital contribution of £1,500 x 17% x 0.5 availability factor) = £1,672.


Guide 480 (2019) Expenses and benefits