Section 154A — Income Tax (Earnings and Pensions) Act 2003: Benefit of van treated as earnings: optional remuneration arrangements

Benefit of van treated as earnings: optional remuneration arrangements 154A 1 Where this Chapter applies to a van in relation to a particular tax year and the conditions in subsection (2) are met—

a the relevant amount is to be treated as earnings from the employment for that tax year, and b section 154(1) does not apply. In such a case (including a case where the relevant amount is nil) the employee is referred to in this Chapter as being chargeable to tax in respect of the van in the tax year.

2 The conditions are that—

a the van is made available to the employee or member of the employee's household pursuant to optional remuneration arrangements, and b the total foregone amount in connection with the van is greater than the modified cash equivalent of the benefit of the van.

3 To find the relevant amount for the purposes of this section take the following steps— Step 1 Take the total foregone amount in connection with the van for the tax year. Step 2 Make any deduction under section 158A in respect of payments by the employee for the private use of the van. The result is the “relevant amount”.

4 In subsection (2) the reference to the “ modified cash equivalent ” is to the amount which would be the cash equivalent of the benefit of the van (after any reductions under section 156 or 157) if this Chapter had effect the following modifications—

a omit paragraph (c) of section 155(8);

b omit section 158;

c in section 159(2)(b), for “155, 157 and 158” substitute “ 155 and 157 ” .

5 For the purposes of subsection (2) assume that the modified cash equivalent of the benefit of the van is zero if the condition in subsection (6) is met.

6 The condition is that the benefit of the van would be exempt from income tax but for section 228A (exclusion of certain exemptions).

7 Where it is necessary for the purposes of subsection (2)(b) and step 1 of subsection (3) to apportion an amount of earnings to a benefit mentioned in subsection (8)(a) or (b) in the tax year, the apportionment is to be made on a just and reasonable basis. In this subsection “earnings” is to be interpreted in accordance with section 69B(5).

8 In this section the total foregone amount in connection with the van for a tax year is the total of—

a the amount foregone (see section 69B) with respect to the benefit of the van for that year, and b the amount foregone (see section 69B) with respect to each other benefit that—

i is connected with the van, ii is provided in that year for the employee, or a member of the employee's household, pursuant to optional remuneration arrangements, and iii is neither the provision of a driver nor the provision of fuel.