Finance Act 1989

9 The following section shall be inserted after section 596— E+W+S+N.I.

“596A Charge to tax: benefits under non-approved schemes.

(1) Where in any year of assessment a person receives a benefit provided undera retirement benefits scheme which is not of a description mentioned insection 596(1) (a), (b) or (c), tax shall be charged in accordance with theprovisions of this section.

(2) Where the benefit is received by an individual, he shall be charged to taxunder Schedule E for that year.

(3) Where the benefit is received by a person other than an individual, theadministrator of the scheme shall be charged to tax under Case VI of ScheduleD for that year.

(4) The amount to be charged to tax is—

(a) in the case of a cash benefit, the amount received, and

(b) in the case of a benefit in kind, an amount equal to whatever is the cashequivalent of the benefit.

(5) In the case of the charge under Case VI of Schedule D, the rate of tax is40 per cent. or such other rate (whether higher or lower) as may for the timebeing be specified by the Treasury by order.

(6) Tax shall not be charged under this section in the case of a benefit whichis chargeable to tax under Schedule E by virtue of section 19(1)1.

(7) But where the amount chargeable to tax by virtue of section 19(1)1 is lessthan the amount which would be chargeable to tax under this section—

(a) subsection (6) above shall not apply, and

(b) the amount chargeable to tax under this section shall be reduced by theamount chargeable to tax by virtue of section 19(1)1.

(8) Tax shall not be charged under this section to the extent that the benefitreceived is attributable to the payment of a sum—

(a) which is deemed to be the income of a person by virtue of section 595(1),and

(b) in respect of which that person has been assessed to tax.

(9) For the purpose of subsection (8) above the provision of a benefit shallbe presumed not to be attributable to the payment of such a sum as ismentioned in that subsection unless the contrary is shown.

596B Section 596A: supplementary provisions.

(1) For the purposes of section 596A the cash equivalent of a benefit in kindis—

(a) in the case of a benefit other than living accommodation, the amount whichwould be the cash equivalent of the benefit under Chapter II of Part V if itwere chargeable under the appropriate provision of that Chapter (treating anysum made good by the recipient as made good by the employee), and

(b) in the case of living accommodation, an amount equal to the value of theaccommodation to the recipient determined in accordance with the followingprovisions of this section less so much of any sum made good by him to thoseat whose cost the accommodation is provided as is properly attributable to theprovision of the accommodation.

(2) Where the cost of providing the accommodation does not exceed£75,000, the value of the accommodation to the recipient in any periodis the rent which would have been payable for the period if the premises hadbeen let to him at an annual rent equal to their annual value as ascertainedunder section 837.

(3) But for a period in which those at whose cost the accommodation isprovided pay rent at an annual rate greater than the annual value as soascertained, the value of the accommodation to the recipient is an amountequal to the rent payable by them for the period.

(4) Where the cost of providing the accommodation does exceed £75,000,the value of the accommodation to the recipient shall be taken to be theaggregate of the value of the accommodation to him determined in accordancewith subsections (2) and (3) above and the additional value of theaccommodation to him determined in accordance with subsections (5) and (6)below.

(5) The additional value of the accommodation to the recipient in any periodis the rent which would have been payable for that period if the premises hadbeen let to him at an annual rent equal to the appropriate percentage of theamount by which the cost of providing the accommodation exceeds £75,000.

(6) Where throughout the period of six years ending with the date when therecipient first occupied the property any estate or interest in the propertywas held by a relevant person (whether or not it was the same estate, interestor person throughout), the additional value shall be calculated as if insubsection (7) below—

(a) the amount referred to in paragraph (a) were the market value of thatproperty as at that date, and

(b) the amount referred to in paragraph (b) did not include expenditure onimprovements made before that date.

(7) For the purposes of this section, the cost of providing any livingaccommodation shall be taken to be the aggregate of—

(a) the amount of any expenditure incurred in acquiring the estate or interestin the property held by a relevant person, and

(b) the amount of any expenditure incurred by a relevant person before theyear of assessment in question on improvements to the property.

(8) The aggregate amount mentioned in subsection (7) above shall be reducedby the amount of any payment made by the recipient to a relevant person, sofar as that amount represents a reimbursement of any such expenditure as ismentioned in paragraph (a) or (b) of that subsection or representsconsideration for the grant to the recipient of a tenancy of the property.

(9) For the purposes of this section, any of the following persons is arelevant person—

(a) the person providing the accommodation;

(b) any person, other than the recipient, who is connected with a personfalling within paragraph (a) above.

(10) In this section—

• “the appropriate percentage” means the rate applicable forthe purposes of section 160 as at the beginning of the year of assessment inquestion;

• “market value”, in relation to any property, means the pricewhich that property might reasonably be expected to fetch on a sale in theopen market with vacant possession, no reduction being made, in estimating themarket value, on account of any option in respect of the property held by therecipient, or a person connected with him, or by any of the persons mentionedin subsection (9) above;

• “property”, in relation to any living accommodation, meansthe property consisting of that living accommodation;

• “tenancy” includes a sub-tenancy;

and section 839 shall apply for the purposes of this section.”