Income Tax (Earnings and Pensions) Act 2003 section 203A

Employment-related benefit provided under optional remuneration arrangements

Section 203A sets out how to calculate the taxable value of employment-related benefits that fall within the general benefits charge (Chapter 10) when they are provided through optional remuneration arrangements, replacing the normal cash equivalent rules with a comparison-based approach.

• Where a general employment-related benefit is provided under an optional remuneration arrangement, the normal cash equivalent method does not apply; instead, a "relevant amount" is treated as taxable earnings for the tax year in which the benefit is provided.
• The relevant amount is determined by comparing the cost of providing the benefit with the amount of salary or other remuneration the employee has given up; the greater of the two drives the taxable figure.
• If the benefit would otherwise have been exempt from income tax (but for the rules that switch off exemptions for optional remuneration arrangements), its cost is treated as zero, meaning the amount foregone will always be the higher figure used.
• Any amount the employee has made good to the benefit provider by 6 July following the end of the relevant tax year is deducted from the relevant amount to arrive at the final sum chargeable to tax.