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The amount of the benefit treated as earnings, subject to the exemptions described in E4.641 and the use of optional remuneration arrangements (see E4.644), is the cash equivalent of the benefit of the loan for the year concerned¹.

The cash equivalent of the benefit for any year is the difference between the amount of interest on the loan at the official rate (see E4.640) and the amount of interest paid on the loan for that year².

Subject to an election for the alternative method (see below) to apply, the method of computing the cash equivalent for any year is as follows³:

1. Ìý

   (1)ÌýÌýÌýÌý take a simple average of the maximum loan outstanding on 5 April in the preceding year (or on the earliest day of the loan in the year) and the maximum loan outstanding on 5 April (or latest day of the loan) in that year

2. Ìý

   (2)ÌýÌýÌýÌý multiply by the number of whole months of the loan and divide by 12 (for this purpose a month is the