½Û×ÓÊÓƵ

Methods of valuing benefits

There are broadly three methods that apply to the calculation of the value of benefits. These should be considered in order as follows:

1. •

   items that are not cash but have direct monetary value to the employee, or are capable of being easily turned into cash by the employee, are valued using the ‘money’s worth’ method

2. •

   specific rules such as scale charges or set methods of calculation in the legislation are used for a range of benefits and expenses

3. •

   for any benefit not covered by the above rules, the ‘cost to the employer’ method is used as part of the residual liability provisions

Note that although the ‘money’s worth’ method is considered before the ‘cost to the employer’ method, where the ‘cost to employer’ method gives a higher value, that is the value used for the benefit for PAYE purposes. In practical terms, this is unlikely to come up as it would be most likely to apply to an asset provided to the employee and there are specific