Infotype 16 contains an additional field Use alternative precise method for the beneficial loans functionality for Great Britain. This field is under the group heading Tax for beneficial loans.

When employees receive an interest-free or cheap loan (beneficial loan) from their employers, there can be a taxable benefit (also known as chargeable benefit). The field Use alternative precise method determines whether the average calculation method or precise calculation method is used to calculate the taxable benefit.

There are two alternative ways of working out the taxable benefit from a beneficial loan. The normal average method applies automatically. It is therefore the default setting on the infotype, unless the employee or director elects for the alternative precise method. Whichever method is chosen will apply to all loans that have been issued to this employee.

Wage type /LCE is used for the cash equivalent of the loan in the average benefits calculation method.

The taxable benefit is calculated by reference to the official rate of interest. All loans between the employee and employer are treated as if they were one loan. The system takes the opening and closing balances if the loan has been outstanding for the full tax year, or the dates the loan was started or closed, if less than a full tax year. The average loan balance is calculated by adding these two amounts together and dividing by 2. The average loan is multiplied by the number of months for which the loan was outstanding in the year and divided by 12. The result is multiplied by the appropriate average official rate of interest that applied during the period the loan was outstanding in the year. Finally, any interest paid by the director or employee on the loan for that year is deducted.

Wage type /LBC is used for the cash equivalent of the loan in the precise benefits calculation method.

This method involves dividing the appropriate official rate by the number of days in the year and applying that to the total of the maximum amounts for the loan outstanding on each day in the tax year.

The total amounts of the maximum balances on the loan for each day are in effect converted to the equivalent balance for one day, to which one day's interest charge at the official rate is then applied.

The taxable benefit is then calculated by deducting any interest paid on the loan for that tax year.

The Payroll Accounting component reads this infotype together with the following: