As a general rule, if you provide your employee with goods or services and they pay the full market value for those items, there is no taxable benefit for the employee.
This rule could work to the employee’s advantage where the actual cost of providing a benefit is less than its taxable value. This can happen with company cars and certain other benefits, where the taxable cash equivalent is calculated using specific charging rules. In such cases the employee would be better off by paying the market price to receive the benefit than by paying tax on that benefit.
In a recent case Apollo Fuels Ltd leased cars to its employees at exactly the cost an unconnected party would pay for the same car under the same lease terms. HMRC wanted to tax those employees as if they had the use of a company car. However, the courts decided that, as the lease was a fair bargain made at market value, there was no taxable benefit for the employees.
This was too good to last. The law will be changed to ensure that other employees can’t side-step tax on company cars, vans, accommodation or loans. From 6 April 2016 the specific charging rules for those benefits will apply, even where the employee pays an open market price to receive the service or use of the asset.
There is an exception where the employer’s normal business involves hiring cars or vans to the public. If an employee leases a vehicle on the same terms and cost as a member of the public, the vehicle is treated as not being made available by means of his employment, so no taxable benefit applies.