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HMRC internal manual

Employment Income Manual

The benefits code: beneficial loans: calculating the cash equivalent: the precise method: consult an Inspector in important cases

Section 183 ITEPA 2003When calculating the cash equivalent of a beneficial loan (see

* the simpler averaging method of calculation (see EIM26210) is used automatically unless * an election for the precise method (see EIM26230) is made and so it is

essential that Inspectors are made aware of important cases where tax may be at risk. The election can only be made within a time limit (see EIM26242) and so it is important that cases are brought to an Inspector’s attention as soon as possible.

Examples are most likely to occur in the close company field.

Let the Inspector know when you find a case where it appears that an election for the alternative method of calculation will significantly increase the amount of the chargeable benefit.

Circumstances in which the Inspector may wish to apply the alternative method include those where:
* the outstanding loan (or loans) was (or were) known to be much higher during the year than at the beginning or end of the tax year concerned, or * there have been large fluctuations in the amounts outstanding (particularly where loans to a director are aggregated, see EIM26180) in the year and * the amount of tax at stake is likely to be large.If more than one income tax year is involved, the Inspector should issue a separate formal notice in writing electing for the alternative precise method of calculation for each tax year concerned.