benefit in kind- personal tax

meibaker

thomas was allowed to take a holiday at a special price due to his employment as a travel agent, the holiday has a retail value of £2,000, and thomas just paid the company the cost price of the holiday of £1,200.
i am bit confused that why £2,000- £1,200= £800 is not included in benefit in kind
many thanks

qwerty

The benefit would calculated based on the marginal cost to the employer of providing the employee with the holiday, less any amounts paid by the employee. The retail selling cost of the holiday is ignored.

The rule was set when a private school allowed tutors to send their children to the school to fill some surplus spaces. HMRC argued that the benefit would be the total cost of running the school devided by the number of pupils (including the tutors children taking the subsidised places).

The tutors argued the benefit was the cost of running the school including the additional places less the cost of running the school if the places were not filled, devided by the number of subsidied places (i.e. marginal cost).

It was agreed that the tutors method was the correct method - therefore the additional cost to the employer will be the benefit (less any contribution from the employee).

In your example, the additional cost to the employer is the cost of the flight, i.e. £1,200. Therefore, is the employee meets this cost, the cost to employer will be NIL and therefore no benefit wil arise.

meibaker

thanks very much for your explanation! now i finally understand! thanks again!
regards may