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The rate at which tax is to be deducted is normally the basic rate of income tax that applies or the tax year in which the payment or transfer is made. The tax deduction is calculated by applying the rate to the full amount of the payment. For valuation purposes, the amount of a payment is taken to be the amount before tax has been deducted by the payer¹. Where the payment is made in kind, the rate is applied to the grossed-up value of the transfer². The net value of a transfer in kind is the cost of what is transferred (the cost incurred in providing and transferring it, including any cost incurred in its provision or transfer by the person making the transfer, reduced by any costs borne by the entertainer), which means that the cost of the assets to the provider is the net amount of the payment for tax purposes³.

Example 1

A car is provided as a prize for the