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Schedule 2 Finance Act 2017

From 6 April 2017 area a annual is accustomed as allotment of alternative accomplishment arrangements, the rules for annual the bulk of the annual advised as balance from the employee’s application has changed.

Section 69A

Optional accomplishment arrange are arrange area the agent gives up the right, or the approaching right, to bacon (known as bacon sacrifice) or the adapted to some added anatomy of bacon or banknote pay in acknowledgment for the benefit.

Where a annual is accustomed beneath alternative accomplishment arrangements, the bulk of the annual advised as balance from the application is the greater of the bulk of:

Sections 228A(1)

Except in assertive bound circumstances, the accustomed exemptions from Income Tax do not administer back the annual is accustomed beneath alternative accomplishment arrangements. Area the annual would contrarily be absolved from tax beneath one of the exemptions in Allotment 4 of ITEPA, the bulk of the annual to be compared with the bulk foregone is accounted to be nil. The bulk of the annual advised as balance is accordingly according to the bulk foregone.

Paragraphs 62(3) to (15) Schedule 2 Finance Act 2017

Where the agent entered into the alternative accomplishment arrange afore 6 April 2017 capricious rules may apply. Subject to assertive bound exceptions, arrange entered into afore 6 April 2017 are still covered by the accustomed annual appraisal rules until the beforehand of:

Those exceptions are cars with emissions of added than 75g CO2/km, active adaptation and academy fees which are all adequate until the beforehand of:

Special rules additionally administer for academy fees (see branch 20).

Section 69A(2) to (4)

Optional accomplishment arrange are arrange area the agent is accustomed a annual in acknowledgment for giving up some anatomy of salary, banknote pay or allowance. A annual is accustomed beneath alternative accomplishment arrange if the agent is accustomed that annual beneath arrange area the employee:

Where a annual is accustomed beneath alternative accomplishment arrangements, the agent continues to be burdened on the annual they accept been provided with. However, the bulk of the annual that’s advised as balance from the application is the greater of the:

This bulk is alleged the ‘relevant amount’.

When authoritative the comparison, avoid any amounts fabricated good. However, already you’ve bent the accordant amount, in best cases the taxable bulk is bargain by any bulk fabricated acceptable by 6 July afterward the end of the tax year in which the annual was given.

An employer provides an agent with clandestine medical allowance that costs it £500. The agent gives up her adapted to bacon of £600. The accordant bulk advised as balance from the application is £600, actuality the greater of the bulk of accouterment the annual (£500) and the bulk foregone (£600). If the agent again makes acceptable £50, this reduces the accordant bulk by £50 to leave an bulk advised as balance from the application of £550.

Where an agent is accustomed a agenda beneath alternative accomplishment arrangements, the accordant bulk advised as balance from the application is the greater of the:

Where a non-cash agenda or acclaim badge is provided, the allegory with the bulk foregone is with the bulk of accouterment the agenda or credit-token.

An agent is provided with a allowance agenda which they can use to buy appurtenances to the bulk of £500 from a aerial artery banker in acknowledgment for giving up bacon of £500. The employer receives a abatement back it buys the agenda which costs it £450. The bulk of accouterment the non-cash agenda of £450 is compared with the bacon foregone of £500. The agent is burdened on a annual of £500 which is according to the bulk foregone.

Where an agent is accustomed active adaptation beneath alternative accomplishment arrangements, the accordant bulk advised as balance from the application is the greater of the:

In alive out the active adaptation annual to be compared with the bulk foregone, do not booty into annual any bulk fabricated acceptable or hire paid by the employee.

An employer rents a acreage for £12,000 a year which one of its advisers occupies. The agent needs to pay hire of £3,000 per year to the employer and additionally sacrifices bacon of £3,000. The hire of £12,000 paid by the employer is compared with the bulk of £3,000 sacrificed by the employee. The accordant bulk is the college bulk of £12,000. The agent is burdened on this bulk beneath the hire paid of £3,000.

Where active adaptation is accustomed beneath alternative accomplishment arrangements, the active adaptation exemptions do not apply.

The alternative accomplishment adjustment rules do not administer to cars with CO2 emissions of 75 grams per kilometre (km) or less. Cars with CO2 emissions of 75 grams/km or beneath abide to be burdened on the banknote agnate of the annual formed out beneath the accustomed rules afterwards accepting to accomplish a allegory with the bacon foregone.

An agent is accustomed a low discharge car which is accessible for their clandestine use beneath an alternative accomplishment adjustment in which the agent gives up bacon of £150 per month, or £1,800 per year. The car has CO2 emissions of 70g per kilometre. The car has a annual bulk of £11,500 and a banknote agnate bulk of £1,495 (£11,500 x 13%). The accordant bulk to be advised as balance from the application is £1,495 because its CO2 emissions are no added than 75 grams.

Cars fabricated accessible for clandestine use with emissions of added than 75 grams of CO2 per kilometre are covered by the alternative accomplishment adjustment rules. In adjustment to actuate the accordant bulk to be advised as balance from the employment, acquisition the greater of the:

The adapted banknote agnate is the bulk which would be the banknote agnate beneath the accustomed annual rules but blank any basal contributions fabricated by the agent and any payments the agent is adapted to accomplish for clandestine use.

If the bulk foregone by the agent is greater than the adapted banknote equivalent, again accomplish a acknowledgment for any basal contribution. For tax years 2017 to 2018 and 2018 to 2019, the acknowledgment is accustomed by adding any basal addition (up to the best of £5,000) by the adapted allotment – see archetype 5.

From 2019 to 2020 onwards, there is an added step.

After adding the basal addition (up to a best of £5,000) by the adapted percentage, the aftereffect should be assorted by the ‘availability factor’. This is begin by demography the cardinal of canicule in the tax year, adding the cardinal of canicule in that year that the car was unavailable, and adding the acknowledgment by the cardinal of canicule in the tax year.

The aftereffect is the bulk of the basal addition accustomed in the tax year (this footfall will alone be bare area the car is accessible for beneath than the abounding tax year) – see archetype 5a.

A acknowledgment is again accustomed for any clandestine use contribution. The aftereffect is the accordant bulk which is advised as balance from the employment.

An agent is accustomed a car in the 2017 to 2018 tax year in acknowledgment for giving up £300 bacon per ages or £3,600 per year. The car has a annual bulk of £20,000 and an adapted allotment of 17%. The agent additionally makes a basal addition of £1,500 for a college blueprint vehicle. The banknote agnate bulk of the agent would commonly be £3,145 (£20,000 beneath basal addition £1,500 =£18,500 x 17%). The adapted banknote agnate is, however, £3,400 as no annual is taken of the basal contribution.

The adapted banknote agnate is again compared with the bulk foregone of £3,600. The bulk foregone of £3,600 is greater, so this bulk is acclimated in chargeless the accordant amount.

The accordant bulk to be advised as balance is £3,600 beneath £255 (capital addition of £1,500x 17%) = £3,345.

An agent has a car fabricated accessible to them in the tax year 2019 to 2020 beneath the acceding of an alternative accomplishment adjustment beneath which they accord up £300 per month.

The car is aboriginal fabricated accessible on 6 October 2019 and as in archetype 1 above, the agent additionally makes a basal addition of £1,500 for a college blueprint vehicle.

The car has a annual bulk of £20,000 and an adapted allotment of 17%.

The adapted banknote agnate of the car will be £1,700 (£20,000 x 17%) = £3,400 beneath acknowledgment for unavailability.

The availability agency actuality is 0.5 (366-183/366) £3,400 x 0.5 = £1,700.

The adapted banknote agnate is again compared to the bulk foregone £1,800 (£300 x 6 months). The bulk foregone is greater than the adapted banknote agnate (£1,700) and so £1,800 is acclimated to actuate the accordant amount.

The accordant bulk to amusement as balance is £1,800 bare £128 (capital addition of £1,500 x 17% x 0.5 availability factor) = £1,672.

Employees may be accustomed a car partly through alternative accomplishment arrange and partly through a claimed addition out of net pay. Back chargeless the accordant amount, alone the bulk foregone beneath the alternative accomplishment arrange should be taken into account.

An agent has the advantage of a banknote allowance of £5,000 which she gives up for a car with a adapted banknote agnate of £3,000. However, the agent wants a college defined archetypal with covering seats costing a added £500. They accomplish a acquittal of £500 to the employer out of her burdened pay. The bulk foregone is £5,000 which is compared with the adapted banknote agnate of £3,000. The accordant bulk is £5,000. A acknowledgment of £85 (£500 x 17%) is again fabricated for the basal addition of £500.

Where a van is fabricated accessible to an employee, the accordant bulk to be advised as balance from the application is the greater of the:

The adapted banknote agnate in affiliation to the annual of a van agency the bulk which would be the banknote agnate beneath the accustomed rules, but blank any payments fabricated by the agent for the clandestine use of the van.

Once the accordant bulk has been bent a acknowledgment is again fabricated for any clandestine use addition fabricated by the agent that they bare to accomplish as a action of actuality able to use the van privately.

An agent is accustomed the use of a van that they can use abreast beneath an alternative accomplishment arrangement. As allotment of the adjustment the agent has agreed to accord up £300 bacon anniversary month. The agent makes no added payments for the clandestine use of the van.

The adapted banknote agnate of the annual of the van is afflicted beneath the accustomed adjustment for the tax year 2017 to 2018 as £3,230.

The accordant bulk to be advised as balance is the college of the adapted banknote agnate of the annual and the bulk foregone, which in this case is £3,600 (£300 x 12).

Where ammunition is fabricated accessible to an agent who’s accountable to tax for a car or van, beneath an alternative accomplishment agreement, the accordant bulk to be advised as balance from the application is the greater of the:

An agent has a car with an adapted allotment of 20% fabricated accessible to them for the continuance of the tax year 2017 to 18. The agent enters into an alternative accomplishment adjustment with their employer beneath which they accord up a £400 per ages banknote allowance in acknowledgment for car fuel.

The banknote agnate of the annual of the ammunition is £4,520 (the anchored bulk of £22,600 assorted by the adapted percentage). The banknote allowance foregone of £4,800 (£400 x 12) is the accordant bulk to be advised as earnings.

No acknowledgment is accustomed from the accordant bulk for the ammunition annual for any clandestine use payments.

Where a taxable bargain adaptation is fabricated accessible to an agent beneath an alternative accomplishment adjustment and the bulk of bacon or banknote pay foregone is greater than the absorption that would accept been payable on the adaptation at the official bulk of interest, the accordant bulk to amusement as balance from the application for the tax year is the bulk of:

If the bulk foregone is beneath than the absorption that would accept been payable on the adaptation at the official bulk of absorption again administer the accustomed rules for chargeless the bulk advised as balance from the employment.

An agent has an interest-free adaptation of £15,000 fabricated accessible by their employer outstanding for the tax year 2017 to 2018, back the official bulk of absorption is 2.5%. The absorption that would be payable on the adaptation at the official bulk of absorption is £375.

The agent agrees beneath an alternative accomplishment adjustment to abandon his annual for the tax year of £400 in acknowledgment for which he does not accept to pay absorption on the loan. The bulk of £400 foregone is greater than the absorption of £375 that would be payable at the official bulk of interest.

The bulk advised as balance from the application is £400. This is the bulk of £400 foregone beneath any absorption paid (nil) on the adaptation for the tax year.

Where an employment-related benefit, advised as balance from the application as a accepted annual beneath Chapter 10 of Allotment 3 of ITEPA, is accustomed to an agent beneath an alternative accomplishment agreement, the accordant bulk advised as balance from the application for the tax year is the greater of the:

When chargeless the taxable bulk of the annual and whether to use the bulk of accouterment the annual or the bulk foregone, any bulk fabricated acceptable by the agent is not taken into account. However, if any bulk has been fabricated acceptable by 6 July afterward the end of the tax year in which the annual was given, this should be deducted from the accordant bulk in chargeless the bulk accountable to tax.

An employer provides an agent with medical allowance costing £500. The agent is adapted to cede bacon of £600. The accordant bulk is £600, actuality the greater of the bulk of accouterment the annual and the bulk foregone. If the agent again makes acceptable an bulk of £100 aural the time permitted, the bulk accountable to tax is bargain to £500.

Payments by an employer to accord an agent with the adapted to get affection or affliction payments are commonly afar from actuality taxed. Area such allowances are provided beneath alternative accomplishment arrangements, the exclusion does not apply. The bulk of the annual is the greater of the:

An employer arranges affection pay awning for its advisers through an allowance action to pay out an bulk to them as ailing pay.

The employer arranges a basal akin of awning for its advisers afterwards acute its advisers to contribute. However, the employer arranges a college akin of ailing pay that costs it £40 for advisers who bacon cede £50 to awning the added premium.

The basal akin of awning is an afar annual and is not advised as balance from the employment. However, the agent will pay tax on £50 for the college akin of cover. Since that allotment of the annual is provided beneath alternative accomplishment arrange it’s not covered by the exclusion.

The alternative accomplishment rules administer in the aforementioned way as for added employment-related allowances area an asset is fabricated accessible for an employee’s use or is transferred to an agent afterwards accepting been provided for the employee’s use as an employment-related benefit.

Chapter 6 branch 6.9 of this adviser explains how to assignment out the bulk of the annual area an asset is transferred to an employee. Area the adding requires any sums already taken into annual in demanding allowances acquired from the use of that asset in an beforehand year again use the amounts for those years as if the alternative accomplishment adjustment rules had not activated in those years.

An employer provides its agent with the use of a computer for 3 years. The agent sacrifices £300 anniversary year. The bazaar bulk of the computer back aboriginal provided for the employee’s clandestine use was £1,200. The bulk of the annual is £240. The agent makes a acquittal of £300 beneath bacon cede and is accustomed the computer at the alpha of year 4.

In years 1, 2 and 3, the bulk foregone in anniversary of those years (£300) is compared with the bulk of the annual (£240). The accordant bulk is the greater of the 2: £300. The bulk of £300 is advised as balance from the application for anniversary of those years.

In year 4, back the asset has a bazaar bulk of £300, the agent is accustomed the asset in acknowledgment for above £300. To assignment out the annual for year 4 booty the college of the bazaar bulk at the date of alteration (£300) and analyze with the bazaar bulk back aboriginal activated as an employment-related annual (£1,200) beneath the bulk of the annual in anniversary of the tax years back provided as an employment-related annual (3 x £240 = £720).

This gives the bulk of the annual as £480 (£1,200 -£720). This is college than the bulk foregone of £300 so the accordant bulk advised as balance from the application in year 4 is £480.

The analogue of annual is broadly fatigued to accommodate any annual or ability aural the allowances code, behindhand of its anatomy or the address in which it is provided.

However, this does not accommodate arrange beneath which an agent reduces their alive hours or becomes advantaged to added contributed holidays. The agent is artlessly abbreviation their alive hours and accepting their pay adapted to booty annual of this.

Similarly, area an employee’s pay is bargain because of changes to their alive adjustment they’re not actuality provided with a benefit. For example, area an agent gives up their about-face allowance because they no best assignment shifts.

Benefits provided beneath alternative accomplishment arrange are not covered by the absolute exemptions aural Allotment 4 of ITEPA 2003 except in assertive bound circumstances. Area a annual would contrarily be covered by one of the exemptions the bulk of the annual to be compared with the bulk foregone in chargeless the accordant bulk is nil. The accordant amount, therefore, is the bulk foregone.

An agent is provided with the use of a abode gym in acknowledgment for sacrificing £300 per year. The annual would contrarily be absolved from tax beneath area 261. The absolution does not administer because the annual of the abode gym is provided beneath alternative accomplishment arrangements. The bulk of the annual is advised as nil. The accordant bulk is the bacon foregone of £300. The agent is burdened on a annual of £300.

Employees are sometimes provided with breadth allowance payments beneath alternative accomplishment arrangements. The absolution for breadth allowance payments does not administer back they’re paid beneath such arrangements. The taxable bulk is the bulk foregone by the employee.

An employer pays 20p per mile to its advisers back they use their own cars for business journeys. The advisers again cede 25p per mile and the employer acme up the breadth allowance acquittal to accomplish a absolute acquittal of 45p per mile. The bulk of 25p paid to the agent beneath bacon cede is taxable.

The barring to this is area an absolution is an ‘excluded exemption’. Afar exemptions administer as accustomed area the annual is provided beneath alternative accomplishment arrangements. They awning payments by administration into registered alimony schemes, childcare vouchers, (closed to new applicants from 4 October 2018) abode nurseries, and anon apprenticed employer provided childcare (closed to new applicants from 4 October 2018), bicycles and cyclist affirmation accessories (including Cycle to Work).

More specifically, the afterward are afar exemptions:

The absolution beneath area 307 is alone advised as an afar absolution to the admeasurement that the allowances provided are for retirement benefits.

Where the agent is provided with afterlife allowances (for example, the employer takes out a activity affirmation action to accommodate afterlife in account benefits) again the absolution does not administer back provided beneath alternative accomplishment arrangements.

Apart from these afar exemptions, the alternative accomplishment adjustment rules additionally do not administer area the annual is a car with CO2 emissions of no added than 75g kilometre.

Subject to assertive specific exceptions, alternative accomplishment arrange entered into afore 6 April 2017 are not afflicted by the alternative accomplishment adjustment rules until the beforehand of:

Those exceptions are area the annual accustomed is a car with emissions of added than 75g CO2/km, active adaptation and academy fees which are adequate until the beforehand of:

Special rules additionally administer for academy fees (see branch 20).

An adjustment is not admired as actuality assorted if the aberration of the adjustment is for affidavit above the ascendancy of the employer and employee. For example, because the agent is complex in an blow and their car has to be replaced as a result. Aberration of an adjustment is additionally abandoned if the aberration is in affiliation with the employee’s alms to approved maternology pay, approved acceptance pay, approved ancestors pay or approved aggregate affectionate pay.

Additionally, area a aberration arises beneath a specific appellation of the adjustment again this is not advised as a aberration of the arrangement.

An agent enters into an alternative accomplishment adjustment for the accouterment of a car area the bulk of bacon sacrificed is affiliated to the breadth apprenticed by the employee. The agent exceeds a accurate breadth beginning during the 2017 to 2018 tax year. As a aftereffect of this the bulk the agent has to pay increases and an added bulk is deducted from his salary. Although the bulk sacrificed has increased, this is not a aberration of the adjustment and the capricious rules can abide to apply.

Where an agent changes or renews their adjustment on or afterwards 6 April 2017, the date of change or face-lifting is taken as the date the alternative accomplishment adjustment rules comes into aftereffect with annual to the annual actuality provided.

For cars with CO2 emissions of added than 75g per kilometre, adaptation and academy fees, area capricious arrange apply, the new rules appear into aftereffect on the beforehand of:

Where the annual is bargain academy fees or a chargeless academy abode in a fee advantageous school, provided the aboriginal arrange were entered into afore 6 April 2017, alike area a new adjustment is entered into, the capricious accoutrement abide to administer until 5 April 2021 provided the new adjustment relates to the same:

The all-embracing character of the academy is important in chargeless whether the adolescent is at the aforementioned academy during the capricious period. For example, if the adolescent moves from the inferior to chief school, or chief academy to sixth anatomy aural the aforementioned school, this is advised as actuality with the aforementioned school.

Arrangements entered into afore 6 April 2017 may be covered by the capricious accoutrement alike area those arrange did not appear into aftereffect until on or afterwards 6 April 2017.

An employer and agent entered into a bacon cede acceding on 1 January 2017 beneath which the agent sacrifices allotment of their bacon in acknowledgment for actuality accustomed a car. The car is not delivered until 1 July 2017 at which point the employee’s bacon is reduced.

The bacon cede adjustment was put into abode afore 6 April 2017 and may be covered by the capricious rules alike admitting the adjustment was not put into aftereffect until July 2017.

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