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HMRC internal manual

Employment Income Manual

Non-approved schemes: example: non-cash receipts

On 1 July 2005, a company marks a director’s retirement by giving him a car valued at £25,000. The receipt falls before 6 April 2006 so the rules relating to non-approved schemes apply and not the rules relating to employer-financed schemes (see EIM15010).

The receipt is in non-cash form and so is not a ‘relevant benefit’ for that purpose (see EIM15403 and EIM15421). It follows that the receipt is not from a non-approved “retirement benefits scheme” as defined in EIM15402. So no charge under s394 ITEPA 2003 arises.

If, as well as giving the car, the employer gave cash, then the scheme would include a ‘‘relevant benefit’” - because the cash is a lump sum given on retirement (see the definition in EIM15402). Because the scheme includes a ‘relevant benefit’ (the cash lump sum) it is within the definition of a non-approved retirement benefits scheme. It follows that Section 394 ITEPA 2003 taxes both the cash and the value of the car (see EIM15421 for guidance on determining that value).