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Income Tax (Earnings and Pensions) Act 2003

Status:

This is the original version (as it was originally enacted).

Part 1Overview

1Overview of contents of this Act

(1)This Act imposes charges to income tax on—

(a)employment income (see Parts 2 to 7),

(b)pension income (see Part 9), and

(c)social security income (see Part 10).

(2)Those charges to tax have effect for the purposes of section 1(1) of ICTA (the general charge to income tax).

(3)This Act also—

(a)confers certain reliefs in respect of liabilities of former employees (see Part 8),

(b)provides for the assessment, collection and recovery of income tax in respect of employment, pension or social security income that is PAYE income (see Part 11), and

(c)allows deductions to be made from such income in respect of payroll giving (see Part 12).

2Abbreviations and general index in Schedule 1

(1)Schedule 1 (abbreviations and defined expressions) applies for the purposes of this Act.

(2)In Schedule 1—

(a)Part 1 gives the meaning of the abbreviated references to Acts and instruments used in this Act, and

(b)Part 2 lists the places where expressions used in this Act are defined or otherwise explained.

(3)Part 2 of Schedule 1 does not apply to expressions used in Chapters 6 to 9 of Part 7 (share incentive plans and other arrangements for acquiring shares): separate indexes relating to these Chapters appear at the end of Schedules 2 to 5.

Part 2Employment income: charge to tax

Chapter 1Introduction

3Structure of employment income Parts

(1)The structure of the employment income Parts is as follows—

  • this Part imposes the charge to tax on employment income, and sets out—

    (a)

    how the amount charged to tax for a tax year is to be calculated, and

    (b)

    who is liable for the tax charged;

  • Part 3 sets out what are earnings and provides for amounts to be treated as earnings;

  • Part 4 deals with exemptions from the charge to tax under this Part (and, in some cases, from other charges to tax);

  • Part 5 deals with deductions from taxable earnings;

  • Part 6 deals with employment income other than earnings or share-related income; and

  • Part 7 deals with share-related income and exemptions.

(2)In this Act “the employment income Parts” means this Part and Parts 3 to 7.

4“Employment” for the purposes of the employment income Parts

(1)In the employment income Parts “employment” includes in particular—

(a)any employment under a contract of service,

(b)any employment under a contract of apprenticeship, and

(c)any employment in the service of the Crown.

(2)In those Parts “employed”, “employee” and “employer” have corresponding meanings.

5Application to offices and office-holders

(1)The provisions of the employment income Parts that are expressed to apply to employments apply equally to offices, unless otherwise indicated.

(2)In those provisions as they apply to an office—

(a)references to being employed are to being the holder of the office;

(b)“employee” means the office-holder;

(c)“employer” means the person under whom the office-holder holds office.

(3)In the employment income Parts “office” includes in particular any position which has an existence independent of the person who holds it and may be filled by successive holders.

Chapter 2Tax on employment income

6Nature of charge to tax on employment income

(1)The charge to tax on employment income under this Part is a charge to tax on—

(a)general earnings, and

(b)specific employment income.

The meaning of “employment income”, “general earnings” and “specific employment income” is given in section 7.

(2)The amount of general earnings or specific employment income which is charged to tax in a particular tax year is set out in section 9.

(3)The rules in Chapters 4 and 5 of this Part, which are concerned with—

(a)the residence and domicile of an employee in a tax year, and

(b)the tax year in which amounts are received or remitted to the United Kingdom,

apply for the purposes of the charge to tax on general earnings but not that on specific employment income.

(4)The person who is liable for any tax charged on employment income is set out in section 13.

(5)Employment income is not charged to tax under this Part if it is within the charge to tax under Case I of Schedule D by virtue of section 314(1) of ICTA (divers and diving supervisors).

7Meaning of “employment income”, “general earnings” and “specific employment income”

(1)This section gives the meaning for the purposes of the Tax Acts of “employment income”, “general earnings” and “specific employment income”.

(2)“Employment income” means—

(a)earnings within Chapter 1 of Part 3,

(b)any amount treated as earnings (see subsection (5)), or

(c)any amount which counts as employment income (see subsection (6)).

(3)“General earnings” means—

(a)earnings within Chapter 1 of Part 3, or

(b)any amount treated as earnings (see subsection (5)),

excluding in each case any exempt income.

(4)“Specific employment income” means any amount which counts as employment income (see subsection (6)), excluding any exempt income.

(5)Subsection (2)(b) or (3)(b) refers to any amount treated as earnings under—

(a)Chapters 7 and 8 of this Part (application of provisions to agency workers and workers under arrangements made by intermediaries),

(b)Chapters 2 to 11 of Part 3 (the benefits code),

(c)Chapter 12 of Part 3 (payments treated as earnings), or

(d)section 262 of CAA 2001 (balancing charges to be given effect by treating them as earnings).

(6)Subsection (2)(c) or (4) refers to any amount which counts as employment income by virtue of—

(a)Part 6 (income which is not earnings or share-related),

(b)Part 7 (share-related income and exemptions), or

(c)any other enactment.

8Meaning of “exempt income”

For the purposes of the employment income Parts, an amount of employment income within paragraph (a), (b) or (c) of section 7(2) is “exempt income” if, as a result of any exemption in Part 4 or elsewhere, no liability to income tax arises in respect of it as such an amount.

Chapter 3Operation of tax charge

9Amount of employment income charged to tax

(1)The amount of employment income which is charged to tax under this Part for a particular tax year is as follows.

(2)In the case of general earnings, the amount charged is the net taxable earnings from an employment in the year.

(3)That amount is calculated under section 11 by reference to any taxable earnings from the employment in the year (see section 10(2)).

(4)In the case of specific employment income, the amount charged is the net taxable specific income from an employment for the year.

(5)That amount is calculated under section 12 by reference to any taxable specific income from the employment for the year (see section 10(3)).

(6)Accordingly, no amount of employment income is charged to tax under this Part for a particular tax year unless—

(a)in the case of general earnings, they are taxable earnings from an employment in that year, or

(b)in the case of specific employment income, it is taxable specific income from an employment for that year.

10Meaning of “taxable earnings” and “taxable specific income”

(1)This section explains what is meant by “taxable earnings” and “taxable specific income” in the employment income Parts.

(2)“Taxable earnings” from an employment in a tax year are to be determined in accordance with—

(a)Chapter 4 of this Part (rules applying to employees resident, ordinarily resident and domiciled in the UK), or

(b)Chapter 5 of this Part (rules applying to employees resident, ordinarily resident or domiciled outside the UK).

(3)“Taxable specific income” from an employment for a tax year means the full amount of any specific employment income which, by virtue of Part 6 or 7 or any other enactment, counts as employment income for that year in respect of the employment.

11Calculation of “net taxable earnings”

(1)For the purposes of this Part the “net taxable earnings” from an employment in a tax year are given by the formula—

TE - DE

where—

  • TE means the total amount of any taxable earnings from the employment in the tax year, and

  • DE means the total amount of any deductions allowed from those earnings under provisions listed in section 327(3) to (5) (deductions from earnings: general).

(2)If the amount calculated under subsection (1) is negative, the net taxable earnings from the employment in the year are to be taken to be nil instead.

(3)Relief may be available under section 380(1) of ICTA (set-off against general income)—

(a)where TE is negative, or

(b)in certain exceptional cases where the amount calculated under subsection (1) is negative.

(4)If a person has more than one employment in a tax year, the calculation under subsection (1) must be carried out in relation to each of the employments.

12Calculation of “net taxable specific income”

(1)For the purposes of this Part the “net taxable specific income” from an employment for a tax year is given by the formula—

TSI - DSI

where—

  • TSI means the amount of any taxable specific income from the employment for the tax year, and

  • DSI means the total amount of any deductions allowed from that income under provisions of the Tax Acts not included in the lists in section 327 (3) and (4) (deductions from earnings: general).

(2)If the amount calculated under subsection (1) is negative, the net taxable specific income from the employment for the year is to be taken to be nil instead.

(3)If a person has more than one kind of specific employment income from an employment for a tax year, the calculation under subsection (1) must be carried out in relation to each of those kinds of specific employment income; and in such a case the “net taxable specific income” from the employment for that year is the total of all the amounts so calculated.

13Person liable for tax

(1)The person liable for any tax on employment income under this Part is the taxable person mentioned in subsection (2) or (3).

This is subject to subsection (4).

(2)If the tax is on general earnings, “the taxable person” is the person to whose employment the earnings relate.

(3)If the tax is on specific employment income, “the taxable person” is the person in relation to whom the income is, by virtue of Part 6 or 7 or any other enactment, to count as employment income.

(4)If the tax is on general earnings received, or remitted to the United Kingdom, after the death of the person to whose employment the earnings relate, the person’s personal representatives are liable for the tax.

(5)In that event the tax is accordingly to be assessed on the personal representatives and is a debt due from and payable out of the estate.

Chapter 4Taxable earnings: rules applying to employee resident, ordinarily resident and domiciled in UK

Taxable earnings

14Taxable earnings under this Chapter: introduction

(1)This Chapter sets out for the purposes of this Part what are taxable earnings from an employment in a tax year in cases where section 15 (earnings for year when employee resident, ordinarily resident and domiciled in UK) applies to general earnings for a tax year.

(2)In this Chapter—

(a)sections 16 and 17 deal with the year for which general earnings are earned, and

(b)sections 18 and 19 deal with the time when general earnings are received.

(3)In the employment income Parts any reference to the charging provisions of this Chapter is a reference to section 15.

Employees resident, ordinarily resident and domiciled in UK

15Earnings for year when employee resident, ordinarily resident and domiciled in UK

(1)This section applies to general earnings for a tax year in which the employee is resident, ordinarily resident and domiciled in the United Kingdom.

(2)The full amount of any general earnings within subsection (1) which are received in a tax year is an amount of “taxable earnings” from the employment in that year.

(3)Subsection (2) applies—

(a)whether the earnings are for that year or for some other tax year, and

(b)whether or not the employment is held at the time when the earnings are received.

Year for which general earnings are earned

16Meaning of earnings “for” a tax year

(1)This section applies for determining whether general earnings are general earnings “for” a particular tax year for the purposes of this Chapter.

(2)General earnings that are earned in, or otherwise in respect of, a particular period are to be regarded as general earnings for that period.

(3)If that period consists of the whole or part of a single tax year, the earnings are to be regarded as general earnings “for” that tax year.

(4)If that period consists of the whole or parts of two or more tax years, the part of the earnings that is to be regarded as general earnings “for” each of those tax years is to be determined on a just and reasonable apportionment.

(5)This section does not apply to any amount which is required by a provision of Part 3 to be treated as earnings for a particular tax year.

17Treatment of earnings for year in which employment not held

(1)This section applies for the purposes of this Chapter in a case where general earnings from an employment would otherwise fall to be regarded as general earnings for a tax year in which the employee does not hold the employment.

(2)If that year falls before the first tax year in which the employment is held, the earnings are to be treated as general earnings for that first tax year.

(3)If that year falls after the last tax year in which the employment was held, the earnings are to be treated as general earnings for that last tax year.

(4)This section does not apply in connection with determining the year for which amounts are to be treated as earnings under Chapters 2 to 11 of Part 3 (the benefits code).

When general earnings are received

18Receipt of money earnings

(1)General earnings consisting of money are to be treated for the purposes of this Chapter as received at the earliest of the following times—

  • Rule 1

    The time when payment is made of or on account of the earnings.

  • Rule 2

    The time when a person becomes entitled to payment of or on account of the earnings.

  • Rule 3

    If the employee is a director of a company and the earnings are from employment with the company (whether or not as director), whichever is the earliest of—

    (a)

    the time when sums on account of the earnings are credited in the company’s accounts or records (whether or not there is any restriction on the right to draw the sums);

    (b)

    if the amount of the earnings for a period is determined by the end of the period, the time when the period ends;

    (c)

    if the amount of the earnings for a period is not determined until after the period has ended, the time when the amount is determined.

(2)Rule 3 applies if the employee is a director of the company at any time in the tax year in which the time mentioned falls.

(3)In this section “director” means—

(a)in relation to a company whose affairs are managed by a board of directors or similar body, a member of that body,

(b)in relation to a company whose affairs are managed by a single director or similar person, that director or person, and

(c)in relation to a company whose affairs are managed by the members themselves, a member of the company,

and includes any person in accordance with whose directions or instructions the directors of the company (as defined above) are accustomed to act.

(4)For the purposes of subsection (3) a person is not to be regarded as a person in accordance with whose directions or instructions the directors of the company are accustomed to act merely because the directors act on advice given by that person in a professional capacity.

(5)Where this section applies—

(a)to a payment on account of general earnings, or

(b)to sums on account of general earnings,

it so applies for the purpose of determining the time when an amount of general earnings corresponding to the amount of that payment or those sums is to be treated as received for the purposes of this Chapter.

19Receipt of non-money earnings

(1)General earnings not consisting of money are to be treated for the purposes of this Chapter as received at the following times.

(2)If an amount is treated as earnings for a particular tax year under any of the following provisions, the earnings are to be treated as received in that year—

  • section 81 (taxable benefits: cash vouchers),

  • section 94 (taxable benefits: credit-tokens),

  • Chapter 5 of Part 3 (taxable benefits: living accommodation),

  • Chapter 6 of Part 3 (taxable benefits: cars, vans and related benefits),

  • Chapter 7 of Part 3 (taxable benefits: loans),

  • Chapter 8 of Part 3 (taxable benefits: notional loans in respect of acquisitions of shares),

  • Chapter 9 of Part 3 (taxable benefits: disposals of shares for more than market value),

  • Chapter 10 of Part 3 (taxable benefits: residual liability to charge),

  • section 222 (payments treated as earnings: payments on account of tax where deduction not possible),

  • section 223 (payments treated as earnings: payments on account of director’s tax).

(3)If an amount is treated as earnings under section 87 (taxable benefits: non-cash vouchers), the earnings are to be treated as received in the tax year mentioned in section 88.

(4)If subsection (2) or (3) does not apply, the earnings are to be treated as received at the time when the benefit is provided.

Chapter 5Taxable earnings: rules applying to employee resident, ordinarily resident or domiciled outside UK

Taxable earnings

20Taxable earnings under this Chapter: introduction

(1)This Chapter sets out for the purposes of this Part what are taxable earnings from an employment in a tax year in cases where any of the following sections applies to general earnings for a tax year—

(a)section 21 (earnings for year when employee resident and ordinarily resident, but not domiciled, in UK, except chargeable overseas earnings),

(b)section 22 (chargeable overseas earnings for year when employee resident and ordinarily resident, but not domiciled, in UK),

(c)section 25 (UK-based earnings for year when employee resident, but not ordinarily resident, in UK),

(d)section 26 (foreign earnings for year when employee resident, but not ordinarily resident, in UK),

(e)section 27 (UK-based earnings for year when employee not resident in UK).

(2)In this Chapter—

(a)sections 29 and 30 deal with the year for which general earnings are earned,

(b)sections 31 to 34 deal with the time when general earnings are received or remitted,

(c)sections 35 to 37 deal with relief for delayed remittances, and

(d)sections 38 to 41 deal with the place where the duties of an employment are performed.

(3)In the employment income Parts any reference to the charging provisions of this Chapter is a reference to any of the sections listed in subsection (1).

Employees resident and ordinarily resident in UK

21Earnings for year when employee resident and ordinarily resident, but not domiciled, in UK, except chargeable overseas earnings

(1)This section applies to general earnings for a tax year in which the employee is resident and ordinarily resident, but not domiciled, in the United Kingdom except to the extent that they are chargeable overseas earnings for that year.

(2)The full amount of any general earnings within subsection (1) which are received in a tax year is an amount of “taxable earnings” from the employment in that year.

(3)Subsection (2) applies—

(a)whether the earnings are for that year or for some other tax year, and

(b)whether or not the employment is held at the time when the earnings are received.

(4)Section 23 applies for calculating how much of an employee’s general earnings are “chargeable overseas earnings” for a tax year, and are therefore within section 22(1) rather than subsection (1) above.

22Chargeable overseas earnings for year when employee resident and ordinarily resident, but not domiciled, in UK

(1)This section applies to general earnings for a tax year in which the employee is resident and ordinarily resident, but not domiciled, in the United Kingdom to the extent that the earnings are chargeable overseas earnings for that year.

(2)The full amount of any general earnings within subsection (1) which are remitted to the United Kingdom in a tax year is an amount of “taxable earnings” from the employment in that year.

(3)Subsection (2) applies—

(a)whether the earnings are for that year or for some other tax year, and

(b)whether or not the employment is held at the time when the earnings are remitted;

but that subsection has effect subject to any relief given under section 35 (delayed remittances: claim for relief).

(4)Section 23 applies for calculating how much of an employee’s general earnings are “chargeable overseas earnings” for a tax year, and are therefore within subsection (1) rather than section 21(1).

(5)Where any chargeable overseas earnings are taxable earnings under subsection (2), any deduction taken into account under section 23(3) in calculating the amount of the chargeable overseas earnings—

(a)cannot then be deducted under section 11 from those taxable earnings, but

(b)may be deducted under that section from any taxable earnings under section 21.

23Calculation of “chargeable overseas earnings”

(1)This section applies for calculating how much of an employee’s general earnings for a tax year are “chargeable overseas earnings” for the purposes of sections 21 and 22.

(2)General earnings for a tax year are “overseas earnings” for that year if—

(a)in that year the employee is resident and ordinarily resident, but not domiciled, in the United Kingdom,

(b)the employment is with a foreign employer, and

(c)the duties of the employment are performed wholly outside the United Kingdom.

(3)To calculate the amount of “chargeable overseas earnings” for a tax year—

  • Step 1

    Identify the full amount of the overseas earnings for that year under subsection (2).

  • Step 2

    Subtract any amounts that would (assuming they were taxable earnings) be allowed to be deducted from those earnings under—

    (a)

    section 232 or Part 5 (deductions allowed from earnings),

    (b)

    section 592(7) of ICTA (contributions to exempt approved schemes),

    (c)

    section 594 of ICTA (contributions to exempt statutory schemes), or

    (d)

    section 262 of CAA 2001 (capital allowances to be given effect by treating them as deductions from earnings).

  • Step 3

    Apply any limit imposed by section 24 (limit where duties of associated employment performed in UK).

    The result is the chargeable overseas earnings for the tax year.

24Limit on chargeable overseas earnings where duties of associated employment performed in UK

(1)This section imposes a limit on how much of an employee’s general earnings are chargeable overseas earnings for a tax year under section 23 if—

(a)in that year the employee holds associated employments as well as the employment to which subsection (2) of that section applies (“the relevant employment”), and

(b)the duties of the associated employments are not performed wholly outside the United Kingdom.

(2)The limit is the proportion of the aggregate earnings for that year from all the employments concerned that is reasonable having regard to—

(a)the nature of and time devoted to each of the following—

(i)the duties performed outside the United Kingdom, and

(ii)those performed in the United Kingdom, and

(b)all other relevant circumstances.

(3)For the purposes of subsection (2) “the aggregate earnings for a year from all the employments concerned” means the amount produced by aggregating the full amount of earnings from each of those employments for the year mentioned in subsection (1) so far as remaining after subtracting any amounts of the kind mentioned in step 2 in section 23(3).

(4)In this section—

(a)“the employments concerned” means the relevant employment and the associated employments;

(b)“associated employments” means employments with the same employer or with associated employers.

(5)The following rules apply to determine whether employers are associated—

  • Rule A

    An individual is associated with a partnership or company if that individual has control of the partnership or company.

  • Rule B

    A partnership is associated with another partnership or with a company if one has control of the other or both are under the control of the same person or persons.

  • Rule C

    A company is associated with another company if one has control of the other or both are under the control of the same person or persons.

(6)In subsection (5)—

(a)in rules A and B “control” has the meaning given by section 840 of ICTA (in accordance with section 719 of this Act), and

(b)in rule C “control” means control within the meaning of section 416 of ICTA (meaning of expressions relating to close companies).

(7)If an amount of chargeable overseas earnings is reduced under step 3 in section 23(3) as a result of applying any limit imposed by this section, the amount of general earnings corresponding to the reduction remains an amount of general earnings within section 21(1).

Employees resident but not ordinarily resident in UK

25UK-based earnings for year when employee resident, but not ordinarily resident, in UK

(1)This section applies to general earnings for a tax year in which the employee is resident but not ordinarily resident in the United Kingdom if they are—

(a)general earnings in respect of duties performed in the United Kingdom, or

(b)general earnings from overseas Crown employment subject to United Kingdom tax.

(2)The full amount of any general earnings within subsection (1) which are received in a tax year is an amount of “taxable earnings” from the employment in that year.

(3)Subsection (2) applies—

(a)whether the earnings are for that year or for some other tax year, and

(b)whether or not the employment is held at the time when the earnings are received.

(4)Section 28 explains what is meant by “general earnings from overseas Crown employment subject to United Kingdom tax”.

26Foreign earnings for year when employee resident, but not ordinarily resident, in UK

(1)This section applies to general earnings for a tax year in which the employee is resident, but not ordinarily resident, in the United Kingdom if they are neither—

(a)general earnings in respect of duties performed in the United Kingdom, nor

(b)general earnings from overseas Crown employment subject to United Kingdom tax.

(2)The full amount of any general earnings within subsection (1) which are remitted to the United Kingdom in a tax year is an amount of “taxable earnings” from the employment in that year.

(3)Subsection (2) applies—

(a)whether the earnings are for that year or for some other tax year, and

(b)whether or not the employment is held at the time when the earnings are remitted;

but that subsection has effect subject to any relief given under section 35 (delayed remittances: claim for relief).

(4)Section 28 explains what is meant by “general earnings from overseas Crown employment subject to United Kingdom tax”.

Employees not resident in UK

27UK-based earnings for year when employee not resident in UK

(1)This section applies to general earnings for a tax year in which the employee is not resident in the United Kingdom if they are—

(a)general earnings in respect of duties performed in the United Kingdom, or

(b)general earnings from overseas Crown employment subject to United Kingdom tax.

(2)The full amount of any general earnings within subsection (1) which are received in a tax year is an amount of “taxable earnings” from the employment in that year.

(3)Subsection (2) applies—

(a)whether the earnings are for that year or for some other tax year, and

(b)whether or not the employment is held at the time when the earnings are received.

(4)Section 28 explains what is meant by “general earnings from overseas Crown employment subject to United Kingdom tax”.

Special class of earnings for purposes of sections 25 to 27

28Meaning of “general earnings from overseas Crown employment subject to UK tax”

(1)This section explains for the purposes of sections 25 to 27 what is meant by “general earnings from overseas Crown employment subject to United Kingdom tax”.

(2)“Crown employment” means employment under the Crown—

(a)which is of a public nature, and

(b)the earnings from which are payable out of the public revenue of the United Kingdom or of Northern Ireland.

(3)“General earnings from overseas Crown employment” means general earnings from such employment in respect of duties performed outside the United Kingdom.

(4)Such earnings are to be taken as being “subject to United Kingdom tax” unless they fall within any exception contained in an order under subsection (5).

(5)The Board of Inland Revenue may make an order excepting from the operation of sections 25(2) and 27(2)—

(a)general earnings of any description of employee specified in the order;

(b)general earnings from any description of employment so specified.

(6)The Board may make the order if they consider that such earnings should not be subject to those provisions having regard to the international obligations of Her Majesty’s Government and such other matters as appear to them to be relevant.

(7)An order may make provision by reference to all or any of the following—

(a)the residence or nationality of the employee;

(b)whether the employee was engaged in or outside the United Kingdom;

(c)the nature of the post, the rate of remuneration and any other terms and conditions applying to it.

(8)Subsection (7) does not affect the generality of the power to make provision by reference to such factors as the Board consider appropriate.

Year for which general earnings are earned

29Meaning of earnings “for” a tax year

(1)This section applies for determining whether general earnings are general earnings “for” a particular tax year for the purposes of this Chapter.

(2)General earnings that are earned in, or otherwise in respect of, a particular period are to be regarded as general earnings for that period.

(3)If that period consists of the whole or part of a single tax year, the earnings are to be regarded as general earnings “for” that tax year.

(4)If that period consists of the whole or parts of two or more tax years, the part of the earnings that is to be regarded as general earnings “for” each of those tax years is to be determined on a just and reasonable apportionment.

(5)This section does not apply to any amount which is required by a provision of Part 3 to be treated as earnings for a particular tax year.

30Treatment of earnings for year in which employment not held

(1)This section applies for the purposes of this Chapter in a case where general earnings from an employment would otherwise fall to be regarded as general earnings for a tax year in which the employee does not hold the employment.

(2)If that year falls before the first tax year in which the employment is held, the earnings are to be treated as general earnings for that first tax year.

(3)If that year falls after the last tax year in which the employment was held, the earnings are to be treated as general earnings for that last tax year.

(4)This section does not apply in connection with determining the year for which amounts are to be treated as earnings under Chapters 2 to 11 of Part 3 (the benefits code).

When general earnings are received or remitted

31Receipt of money earnings

(1)General earnings consisting of money are to be treated for the purposes of this Chapter as received at the earliest of the following times—

  • Rule 1

    The time when payment is made of or on account of the earnings.

  • Rule 2

    The time when a person becomes entitled to payment of or on account of the earnings.

  • Rule 3

    If the employee is a director of a company and the earnings are from employment with the company (whether or not as director), whichever is the earliest of—

    (a)

    the time when sums on account of the earnings are credited in the company’s accounts or records (whether or not there is any restriction on the right to draw the sums);

    (b)

    if the amount of the earnings for a period is determined by the end of the period, the time when the period ends;

    (c)

    if the amount of the earnings for a period is not determined until after the period has ended, the time when the amount is determined.

(2)Rule 3 applies if the employee is a director of the company at any time in the tax year in which the time mentioned falls.

(3)In this section “director” means—

(a)in relation to a company whose affairs are managed by a board of directors or similar body, a member of that body,

(b)in relation to a company whose affairs are managed by a single director or similar person, that director or person, and

(c)in relation to a company whose affairs are managed by the members themselves, a member of the company,

and includes any person in accordance with whose directions or instructions the directors of the company (as defined above) are accustomed to act.

(4)For the purposes of subsection (3) a person is not to be regarded as a person in accordance with whose directions or instructions the directors of the company are accustomed to act merely because the directors act on advice given by that person in a professional capacity.

(5)Where this section applies—

(a)to a payment on account of general earnings, or

(b)to sums on account of general earnings,

it so applies for the purpose of determining the time when an amount of general earnings corresponding to the amount of that payment or those sums is to be treated as received for the purposes of this Chapter.

32Receipt of non-money earnings

(1)General earnings not consisting of money are to be treated for the purposes of this Chapter as received at the following times.

(2)If an amount is treated as earnings for a particular tax year under any of the following provisions, the earnings are to be treated as received in that year—

  • section 81 (taxable benefits: cash vouchers),

  • section 94 (taxable benefits: credit-tokens),

  • Chapter 5 of Part 3 (taxable benefits: living accommodation),

  • Chapter 6 of Part 3 (taxable benefits: cars, vans and related benefits),

  • Chapter 7 of Part 3 (taxable benefits: loans),

  • Chapter 8 of Part 3 (taxable benefits: notional loans in respect of acquisitions of shares),

  • Chapter 9 of Part 3 (taxable benefits: disposals of shares for more than market value),

  • Chapter 10 of Part 3 (taxable benefits: residual liability to charge),

  • section 222 (payments treated as earnings: payments on account of tax where deduction not possible),

  • section 223 (payments treated as earnings: payments on account of director’s tax).

(3)If an amount is treated as earnings under section 87 (taxable benefits: non-cash vouchers), the earnings are to be treated as received in the tax year mentioned in section 88.

(4)If subsection (2) or (3) does not apply, the earnings are to be treated as received at the time when the benefit is provided.

33Earnings remitted to UK

(1)This section explains what is meant for the purposes of this Chapter by general earnings being remitted to the United Kingdom.

(2)If general earnings are—

(a)paid, used, or enjoyed in the United Kingdom, or

(b)transmitted or brought to the United Kingdom in any manner or form,

they are to be treated as remitted to the United Kingdom at the time when they are so paid, used or enjoyed or dealt with as mentioned in paragraph (b).

(3)If, in the case of an employee who is ordinarily resident in the United Kingdom, general earnings are used outside the United Kingdom to satisfy a UK-linked debt, they are to be treated as remitted to the United Kingdom at the time when they are so used.

This is subject to subsection (5)(b).

(4)In subsection (3) “UK-linked” debt, in relation to an employee, means—

(a)a debt for money lent to the employee in the United Kingdom, or for interest on money so lent, or

(b)a debt for money lent to the employee outside the United Kingdom and received in the United Kingdom, or

(c)a debt incurred for satisfying—

(i)a debt falling within paragraph (a) or (b), or

(ii)another debt falling within this paragraph.

(5)In the case of a debt (within subsection (4)(b) or (c)) for money lent to the employee outside the United Kingdom—

(a)it does not matter whether the money lent is received in the United Kingdom before or after the general earnings are used to satisfy the debt, but

(b)if the money lent is not received in the United Kingdom until after the general earnings are used to satisfy the debt, the general earnings are to be treated as remitted to the United Kingdom at the time when the money lent is received there (instead of at the time provided in subsection (3)).

(6)In subsections (4) and (5) any reference to money lent being received in the United Kingdom includes a reference to its being brought there.

(7)Section 34 (further provisions about UK-linked debts) applies for the purposes of subsections (3) to (5).

34Earnings remitted to UK: further provisions about UK-linked debts

(1)This section applies for the purposes of the provisions of section 33 which relate to general earnings that are used to satisfy a UK-linked debt.

(2)General earnings are to be treated as used to satisfy a debt for money lent to a person (“the borrower”) if conditions A and B are met.

(3)Condition A is that the earnings are dealt with in such a way that the lender holds money or property representing the earnings on behalf of or on account of the borrower in such circumstances that it is available to the lender to satisfy or reduce the debt (by set-off or otherwise).

(4)Condition B is that under an arrangement between the borrower and the lender—

(a)the amount for the time being owed by the borrower to the lender, or

(b)the time at which the debt is to be wholly or partly repaid,

depends in any respect, directly or indirectly, on the amount or value the lender holds on behalf of or on account of the borrower as mentioned in subsection (3).

(5)If and to the extent that money lent is used to satisfy a debt, the debt for the money lent is to be treated as incurred for satisfying that other debt.

(6)In this section “lender” includes, in relation to any money lent, any person for the time being entitled to repayment.

(7)In this section and section 33 “satisfy”, in relation to a debt, means satisfy wholly or in part.

Relief for delayed remittances

35Relief for delayed remittances

(1)A person may make a claim for relief under this section for a tax year in respect of delayed remittances from an employment.

(2)“Delayed remittances” are general earnings of the person which—

(a)were received in a country or territory outside the United Kingdom before the tax year for which relief is claimed,

(b)were not remitted to the United Kingdom until that tax year,

(c)could not have been transferred by the person to the United Kingdom before that tax year because of—

(i)the laws of the country or territory where they were received,

(ii)executive action of its government, or

(iii)the impossibility of obtaining there currency (other than the currency of that country or territory) that could be transferred to the United Kingdom, and

(d)constitute taxable earnings from the employment in that tax year under section 22(2) or 26(2) (general earnings which are taxable earnings if remitted to UK).

(3)If a person claims relief for a tax year in respect of delayed remittances from an employment, the amount of the remittances—

(a)is to be deducted from the person’s general earnings which constitute taxable earnings from the employment in that year under section 22(2) or 26(2); and

(b)is instead to constitute taxable earnings from the employment under that provision in one or more earlier tax years in accordance with—

(i)subsection (4), or

(ii)alternatively, section 36 where an election is made under that section.

(4)Where this subsection applies—

(a)the amount referred to in subsection (3)(b) is to be treated as taxable earnings from the employment in the tax year in which it was received, or

(b)if it consists of general earnings received in two or more tax years, so much of the amount as was received in each of those years is to be treated as taxable earnings from the employment in that year.

36Election in respect of delayed remittances

(1)This section applies if—

(a)a person (“the claimant”) claims relief under section 35 for a tax year in respect of delayed remittances from an employment, and

(b)at the end of that year the claimant had blocked earnings from that employment for one or more previous tax years.

(2)General earnings are “blocked earnings” for a tax year if they—

(a)were received in a country or territory outside the United Kingdom in that year,

(b)could not be transferred by the claimant to the United Kingdom in that year because of any of the things mentioned in section 35(2)(c), and

(c)would have constituted taxable earnings from the employment in that year under section 22(2) or 26(2) (general earnings which are taxable earnings if remitted to UK) if they had been so transferred.

(3)The claimant may elect for the purposes of section 35(3)(b) to have the amount of the delayed remittances treated as taxable earnings from the employment in one or more tax years specified in the election.

(4)A claimant may only specify a particular tax year if—

(a)there were blocked earnings of the claimant for that year from the employment, and

(b)it is a year prior to the tax year for which relief is claimed.

(5)If more than one year is specified, the election must indicate the amount which is to be treated as taxable earnings in each of those years.

(6)However the amount of the delayed remittances which the claimant elects to be treated as taxable earnings in a particular tax year must not exceed—

BE - PC

where—

  • BE is the amount of blocked earnings of the claimant for that year from the employment, and

  • PC is the amount of remittances treated as taxable earnings from the employment in that year as a result of a previous claim by the claimant under section 35.

(7)An election under this section—

(a)must be made as part of the claim under section 35, and

(b)is irrevocable.

(8)A person’s personal representatives may make any election under this section which the person might have made.

37Claims for relief on delayed remittances

(1)A claim under section 35 must be made on or before the fifth anniversary of the normal self-assessment filing date for the tax year for which relief is claimed.

(2)All adjustments (by way of repayment of tax, assessment or otherwise) are to be made which are necessary to give effect to section 35.

(3)Those adjustments may be made at any time, despite anything to the contrary in the Income Tax Acts.

(4)A person’s personal representatives may make any claim under section 35 which the person might have made.

(5)If a person dies—

(a)any tax paid by the person and repayable because of a claim under section 35 is to be repaid to the person’s personal representatives, and

(b)the person’s personal representatives are liable for any additional tax which arises because of a claim under that section.

(6)Where subsection (5)(b) applies, the additional tax—

(a)is to be assessed on the personal representatives, and

(b)is a debt due from and payable out of the estate.

Place of performance of duties of employment

38Earnings for period of absence from employment

(1)This section applies if a person ordinarily performs the whole or part of the duties of an employment in the United Kingdom.

(2)General earnings for a period of absence from the employment are to be treated for the purposes of this Chapter as general earnings for duties performed in the United Kingdom except in so far as they would, but for that absence, have been general earnings for duties performed outside the United Kingdom.

39Duties in UK merely incidental to duties outside UK

(1)This section applies if in a tax year an employment is in substance one whose duties fall to be performed outside the United Kingdom.

(2)Duties of the employment performed in the United Kingdom whose performance is merely incidental to the performance of duties outside the United Kingdom are to be treated for the purposes of this Chapter as performed outside the United Kingdom.

(3)This section does not affect any question as to—

(a)where any duties are performed, or

(b)whether a person is absent from the United Kingdom,

for the purposes of section 378 (deduction from seafarers' earnings: eligibility), and section 383 (place of performance of incidental duties) applies instead.

40Duties on board vessel or aircraft

(1)Duties which a person performs on a vessel engaged on a voyage not extending to a port outside the United Kingdom are to be treated for the purposes of this Chapter as performed in the United Kingdom.

(2)Duties which a person resident in the United Kingdom performs on a vessel or aircraft engaged—

(a)on a voyage or journey beginning or ending in the United Kingdom, or

(b)on a part beginning or ending in the United Kingdom of any other voyage or journey,

are to be treated as performed in the United Kingdom for the purposes of this Chapter.

(3)Subsection (2) does not, however, apply for the purposes of section 24(1)(b) (limit on chargeable overseas earnings under section 23 where duties of associated employment performed in UK) in relation to any duties of a person’s employment if—

(a)the employment is as a seafarer, and

(b)the duties are performed on a ship.

(4)Instead, any duties of the employment which are performed on a ship engaged—

(a)on a voyage beginning or ending outside the United Kingdom (but excluding any part of it beginning and ending there), or

(b)on a part beginning or ending outside the United Kingdom of any other voyage,

are to be treated as performed outside the United Kingdom for the purposes of section 24(1)(b).

(5)For the purposes of subsections (3) and (4)—

(a)employment “as a seafarer” means an employment consisting of the performance of duties on a ship or of such duties and others incidental to them;

(b)“ship” does not include—

(i)any offshore installation within the meaning of the Mineral Workings (Offshore Installations) Act 1971 (c. 61), or

(ii)what would be such an installation if the references in that Act to controlled waters were to any waters;

(c)the areas designated under section 1(7) of the Continental Shelf Act 1964 (c. 29) are treated as part of the United Kingdom.

41Employment in UK sector of continental shelf

(1)General earnings in respect of duties performed in the UK sector of the continental shelf in connection with exploration or exploitation activities are to be treated for the purposes of this Chapter as general earnings in respect of duties performed in the United Kingdom.

(2)In this section—

  • “the UK sector of the continental shelf” means the areas designated under section 1(7) of the Continental Shelf Act 1964, and

  • “exploration or exploitation activities” means activities carried on in connection with the exploration or exploitation of so much of the seabed and subsoil and their natural resources as is situated in the United Kingdom or the UK sector of the continental shelf.

Chapter 6Disputes as to domicile or ordinary residence

42Board to determine dispute as to domicile or ordinary residence

(1)This section applies if, in connection with any of the provisions listed in subsection (3), there is a dispute as to whether a person is or has been ordinarily resident or domiciled in the United Kingdom.

(2)The question whether the person is or has been so resident or domiciled is to be referred to and decided by the Board of Inland Revenue.

(3)The provisions referred to in subsection (1) are—

  • section 15 (earnings for year when employee resident, ordinarily resident and domiciled in UK);

  • section 21 (earnings for year when employee resident and ordinarily resident, but not domiciled, in UK, except chargeable overseas earnings);

  • section 22 (chargeable overseas earnings for year when employee resident and ordinarily resident, but not domiciled, in UK);

  • section 23 (calculation of “chargeable overseas earnings”);

  • section 25 (UK-based earnings for year when employee resident, but not ordinarily resident, in UK);

  • section 26 (foreign earnings for year when employee resident, but not ordinarily resident, in UK);

  • section 341 (deduction for travel expenses at start or finish of overseas employment);

  • section 342 (deduction for travel expenses between employments where duties performed abroad);

  • section 355 (deduction for corresponding payments by non-domiciled employees with foreign employers);

  • section 376 (deduction for foreign accommodation and subsistence costs etc. where overseas employment);

  • section 390 (exception for payments to non-approved pension schemes if non-domiciled employees with foreign employers).

43Appeal against Board’s decision on domicile or ordinary residence

(1)A person who has been given notice of the Board’s decision on a question under section 42 may, if aggrieved by that decision, appeal to the Special Commissioners.

(2)The notice of appeal must be given to the Board within 3 months after the date on which the person is given notice of the Board’s decision.

Chapter 7Application of provisions to agency workers

Agency workers

44Treatment of workers supplied by agencies

(1)This section applies if—

(a)an individual (“the worker”) personally provides, or is under an obligation personally to provide, services (which are not excluded services) to another person (“the client”),

(b)the services are supplied by or through a third person (“the agency”) under the terms of an agency contract,

(c)the worker is subject to (or to the right of) supervision, direction or control as to the manner in which the services are provided, and

(d)remuneration receivable under or in consequence of the agency contract does not constitute employment income of the worker apart from this Chapter.

(2)If this section applies—

(a)the services which the worker provides, or is obliged to provide, to the client under the agency contract are to be treated for income tax purposes as duties of an employment held by the worker with the agency, and

(b)all remuneration receivable under or in consequence of the agency contract (including remuneration which the client pays or provides in relation to the services) is to be treated for income tax purposes as earnings from that employment.

45Arrangements with agencies

If—

(a)an individual (“the worker”), with a view to personally providing services (which are not excluded services) to another person (“the client”), enters into arrangements with a third person (“the agency”), and

(b)the arrangements are such that the services (if and when they are provided) will be treated for income tax purposes under section 44 as duties of an employment held by the worker with the agency,

any remuneration receivable under or in consequence of the arrangements is to be treated for income tax purposes as earnings from that employment.

46Cases involving unincorporated bodies etc.

(1)Section 44 also applies—

(a)if the worker personally provides, or is under an obligation to personally provide, the services in question as a partner in a firm or a member of an unincorporated body;

(b)if the agency in question is an unincorporated body of which the worker is a member.

(2)In a case within subsection (1)(a), remuneration receivable under or in consequence of the agency contract is to be treated for income tax purposes as income of the worker and not as income of the firm or body.

Supplementary

47Interpretation of this Chapter

(1)In this Chapter “agency contract” means a contract made between the worker and the agency under the terms of which the worker is obliged to personally provide services to the client.

(2)In this Chapter “excluded services” means—

(a)services as an actor, singer, musician or other entertainer or as a fashion, photographic or artist’s model, or

(b)services provided wholly—

(i)in the worker’s own home, or

(ii)at other premises which are neither controlled or managed by the client nor prescribed by the nature of the services.

(3)For the purposes of this Chapter “remuneration”—

(a)does not include anything that would not have constituted employment income of the worker if it had been receivable in connection with an employment apart from this Chapter, but

(b)subject to paragraph (a), includes every form of payment, gratuity, profit and benefit.

Chapter 8Application of provisions to workers under arrangements made by intermediaries

Application of this Chapter

48Scope of this Chapter

(1)This Chapter has effect with respect to the provision of services through an intermediary.

(2)Nothing in this Chapter—

(a)affects the operation of Chapter 7 of this Part, or

(b)applies to payments subject to deduction of tax under section 555 of ICTA (payments to non-resident entertainers and sportsmen).

49Engagements to which this Chapter applies

(1)This Chapter applies where—

(a)an individual (“the worker”) personally performs, or is under an obligation personally to perform, services for the purposes of a business carried on by another person (“the client”),

(b)the services are provided not under a contract directly between the client and the worker but under arrangements involving a third party (“the intermediary”), and

(c)the circumstances are such that, if the services were provided under a contract directly between the client and the worker, the worker would be regarded for income tax purposes as an employee of the client.

(2)In subsection (1)(a) “business” includes any activity carried on—

(a)by a government or public or local authority (in the United Kingdom or elsewhere), or

(b)by a body corporate, unincorporated body or partnership.

(3)The reference in subsection (1)(b) to a “third party” includes a partnership or unincorporated body of which the worker is a member.

(4)The circumstances referred to in subsection (1)(c) include the terms on which the services are provided, having regard to the terms of the contracts forming part of the arrangements under which the services are provided.

(5)In this Chapter “engagement to which this Chapter applies” means any such provision of services as is mentioned in subsection (1).

50Worker treated as receiving earnings from employment

(1)If, in the case of an engagement to which this Chapter applies, in any tax year—

(a)the conditions specified in section 51, 52 or 53 are met in relation to the intermediary, and

(b)the worker, or an associate of the worker—

(i)receives from the intermediary, directly or indirectly, a payment or benefit that is not employment income, or

(ii)has rights which entitle, or which in any circumstances would entitle, the worker or associate to receive from the intermediary, directly or indirectly, any such payment or benefit,

the intermediary is treated as making to the worker, and the worker is treated as receiving, in that year a payment which is to be treated as earnings from an employment (“the deemed employment payment”).

(2)A single payment is treated as made in respect of all engagements in relation to which the intermediary is treated as making a payment to the worker in the tax year.

(3)The deemed employment payment is treated as made at the end of the tax year, unless section 57 applies (earlier date of deemed payment in certain cases).

(4)In this Chapter “the relevant engagements”, in relation to a deemed employment payment, means the engagements mentioned in subsection (2).

51Conditions of liability where intermediary is a company

(1)Where the intermediary is a company the conditions are that the intermediary is not an associated company of the client that falls within subsection (2) and either—

(a)the worker has a material interest in the intermediary, or

(b)the payment or benefit mentioned in section 50(1)(b)—

(i)is received or receivable by the worker directly from the intermediary, and

(ii)can reasonably be taken to represent remuneration for services provided by the worker to the client.

(2)An associated company of the client falls within this subsection if it is such a company by reason of the intermediary and the client being under the control—

(a)of the worker, or

(b)of the worker and other persons.

(3)A worker is treated as having a material interest in a company if—

(a)the worker, alone or with one or more associates of the worker, or

(b)an associate of the worker, with or without other such associates,

has a material interest in the company.

(4)For this purpose a material interest means—

(a)beneficial ownership of, or the ability to control, directly or through the medium of other companies or by any other indirect means, more than 5% of the ordinary share capital of the company; or

(b)possession of, or entitlement to acquire, rights entitling the holder to receive more than 5% of any distributions that may be made by the company; or

(c)where the company is a close company, possession of, or entitlement to acquire, rights that would in the event of the winding up of the company, or in any other circumstances, entitle the holder to receive more than 5% of the assets that would then be available for distribution among the participators.

(5)In subsection (4)(c) “participator” has the meaning given by section 417(1) of ICTA.

52Conditions of liability where intermediary is a partnership

(1)Where the intermediary is a partnership the conditions are as follows.

(2)In relation to any payment or benefit received or receivable by the worker as a member of the partnership the conditions are—

(a)that the worker, alone or with one or more relatives, is entitled to 60% or more of the profits of the partnership; or

(b)that most of the profits of the partnership concerned derive from the provision of services under engagements to which this Chapter applies—

(i)to a single client, or

(ii)to a single client together with associates of that client; or

(c)that under the profit sharing arrangements the income of any of the partners is based on the amount of income generated by that partner by the provision of services under engagements to which this Chapter applies.

In paragraph (a) “relative” means husband or wife, parent or child or remoter relation in the direct line, or brother or sister.

(3)In relation to any payment or benefit received or receivable by the worker otherwise than as a member of the partnership, the conditions are that the payment or benefit—

(a)is received or receivable by the worker directly from the intermediary, and

(b)can reasonably be taken to represent remuneration for services provided by the worker to the client.

53Conditions of liability where intermediary is an individual

Where the intermediary is an individual the conditions are that the payment or benefit—

(a)is received or receivable by the worker directly from the intermediary, and

(b)can reasonably be taken to represent remuneration for services provided by the worker to the client.

The deemed employment payment

54Calculation of deemed employment payment

(1)The amount of the deemed employment payment for a tax year (“the year”) is the amount resulting from the following steps—

  • Step 1

    Find (applying section 55) the total amount of all payments and benefits received by the intermediary in the year in respect of the relevant engagements, and reduce that amount by 5%.

  • Step 2

    Add (applying that section) the amount of any payments and benefits received by the worker in the year in respect of the relevant engagements, otherwise than from the intermediary, that—

    (a)

    are not chargeable to income tax as employment income, and

    (b)

    would be so chargeable if the worker were employed by the client.

  • Step 3

    Deduct (applying Chapters 1 to 5 of Part 5) the amount of any expenses met in the year by the intermediary that would have been deductible from the taxable earnings from the employment if—

    (a)

    the worker had been employed by the client, and

    (b)

    the expenses had been met by the worker out of those earnings.

    If the result at this or any later point is nil or a negative amount, there is no deemed employment payment.

  • Step 4

    Deduct the amount of any capital allowances in respect of expenditure incurred by the intermediary that could have been deducted from employment income under section 262 of CAA 2001 (employments and offices) if the worker had been employed by the client and had incurred the expenditure.

  • Step 5

    Deduct any contributions made in the year for the benefit of the worker by the intermediary to a scheme approved under Chapter 1 or 4 of Part 14 of ICTA that if made by an employer for the benefit of an employee would not be chargeable to income tax as income of the employee.

    This does not apply to excess contributions made and later repaid.

  • Step 6

    Deduct the amount of any employer’s national insurance contributions paid by the intermediary for the year in respect of the worker.

  • Step 7

    Deduct the amount of any payments and benefits received in the year by the worker from the intermediary—

    (a)

    in respect of which the worker is chargeable to income tax as employment income, and

    (b)

    which do not represent items in respect of which a deduction was made under step 3.

  • Step 8

    Assume that the result of step 7 represents an amount together with employer’s national insurance contributions on it, and deduct what (on thatassumption) would be the amount of those contributions.

    The result is the deemed employment payment.

(2)If section 559 of ICTA applies (sub-contractors in the construction industry: payments to be made under deduction), the intermediary is treated for the purposes of step 1 of subsection (1) as receiving the amount that would have been received had no deduction been made under that section.

(3)In step 3 of subsection (1), the reference to expenses met by the intermediary includes—

(a)expenses met by the worker and reimbursed by the intermediary, and

(b)where the intermediary is a partnership and the worker is a member of the partnership, expenses met by the worker for and on behalf of the partnership.

(4)In step 3 of subsection (1), the expenses deductible include the amount of any mileage allowance relief for the year which the worker would have been entitled to in respect of the use of a vehicle falling within subsection (5) if—

(a)the worker had been employed by the client, and

(b)the vehicle had not been a company vehicle (within the meaning of Chapter 2 of Part 4).

(5)A vehicle falls within this subsection if—

(a)it is provided by the intermediary for the worker, or

(b)where the intermediary is a partnership and the worker is a member of the partnership, it is provided by the worker for the purposes of the business of the partnership.

(6)Where, on the assumptions mentioned in paragraphs (a) and (b) of step 3 of subsection (1), the deductibility of the expenses is determined under sections 337 to 342 (travel expenses), the duties performed under the relevant engagements are treated as duties of a continuous employment with the intermediary.

(7)In step 7 of subsection (1), the amounts deductible include any payments received in the year from the intermediary that—

(a)are exempt from income tax by virtue of section 229 or 233 (mileage allowance payments and passenger payments), and

(b)do not represent items in respect of which a deduction was made under step 3.

(8)For the purposes of subsection (1) any necessary apportionment is to be made on a just and reasonable basis of amounts received by the intermediary that are referable—

(a)to the services of more than one worker, or

(b)partly to the services of the worker and partly to other matters.

55Application of rules relating to earnings from employment

(1)The following provisions apply in relation to the calculation of the deemed employment payment.

(2)A “payment or benefit” means anything that, if received by an employee for performing the duties of an employment, would be earnings from the employment.

(3)The amount of a payment or benefit is taken to be—

(a)in the case of a payment or cash benefit, the amount received, and

(b)in the case of a non-cash benefit, the cash equivalent of the benefit.

(4)The cash equivalent of a non-cash benefit is taken to be—

(a)the amount that would be earnings if the benefit were earnings from an employment, or

(b)in the case of living accommodation, whichever is the greater of that amount and the cash equivalent determined in accordance with section 398(2).

(5)A payment or benefit is treated as received—

(a)in the case of a payment or cash benefit, when payment is made of or on account of the payment or benefit;

(b)in the case of a non-cash benefit that is calculated by reference to a period within the tax year, at the end of that period;

(c)in the case of a non-cash benefit that is not so calculated, when it would have been treated as received for the purposes of Chapter 4 or 5 of this Part (see section 19 or 32) if—

(i)the worker had been an employee, and

(ii)the benefit had been provided by reason of the employment.

56Application of Income Tax Acts in relation to deemed employment

(1)The Income Tax Acts (in particular, the PAYE provisions) apply in relation to the deemed employment payment as follows.

(2)They apply as if—

(a)the worker were employed by the intermediary, and

(b)the relevant engagements were undertaken by the worker in the course of performing the duties of that employment.

(3)The deemed employment payment is treated in particular—

(a)as taxable earnings from the employment for the purpose of securing that any deductions under Chapters 2 to 6 of Part 5 do not exceed the deemed employment payment; and

(b)as taxable earnings from the employment for the purposes of section 232.

(4)The worker is not chargeable to tax in respect of the deemed employment payment if, or to the extent that, by reason of any combination of the factors mentioned in subsection (5), the worker would not be chargeable to tax if—

(a)the client employed the worker,

(b)the worker performed the services in the course of that employment, and

(c)the deemed employment payment were a payment by the client of earnings from that employment.

(5)The factors are—

(a)the worker being resident, ordinarily resident or domiciled outside the United Kingdom,

(b)the client being resident or ordinarily resident outside the United Kingdom, and

(c)the services in question being provided outside the United Kingdom.

(6)Where the intermediary is a partnership or unincorporated association, the deemed employment payment is treated as received by the worker in the worker’s personal capacity and not as income of the partnership or association.

(7)Where—

(a)the worker is resident in the United Kingdom,

(b)the services in question are provided in the United Kingdom, and

(c)the client or employer carries on business in the United Kingdom,

the intermediary is treated as having a place of business in the United Kingdom, whether or not it in fact does so.

(8)The deemed employment payment is treated as relevant earnings of the worker for the purposes of section 644 of ICTA (relevant earnings for purposes of permissible pension contributions).

Supplementary provisions

57Earlier date of deemed employment payment in certain cases

(1)If in any tax year—

(a)a deemed employment payment is treated as made, and

(b)before the date on which the payment would be treated as made under section 50(2) any relevant event (as defined below) occurs in relation to the intermediary,

the deemed employment payment for that year is treated as having been made immediately before that event or, if there is more than one, immediately before the first of them.

(2)Where the intermediary is a company the following are relevant events—

(a)the company ceasing to trade;

(b)where the worker is a member of the company, the worker ceasing to be such a member;

(c)where the worker holds an office with the company, the worker ceasing to hold such an office;

(d)where the worker is employed by the company, the worker ceasing to be so employed.

(3)Where the intermediary is a partnership the following are relevant events—

(a)the dissolution of the partnership or the partnership ceasing to trade or a partner ceasing to act as such;

(b)where the worker is employed by the partnership, the worker ceasing to be so employed.

(4)Where the intermediary is an individual and the worker is employed by the intermediary, it is a relevant event if the worker ceases to be so employed.

(5)The fact that the deemed employment payment is treated as made before the end of the tax year does not affect what receipts and other matters are taken into account in calculating its amount.

58Relief in case of distributions by intermediary

(1)A claim for relief may be made under this section where the intermediary—

(a)is a company,

(b)is treated as making a deemed employment payment in any tax year, and

(c)either in that tax year (whether before or after that payment is treated as made), or in a subsequent tax year, makes a distribution (a “relevant distribution”).

(2)A claim for relief under this section must be made—

(a)by the intermediary by notice to the Inland Revenue, and

(b)within 5 years after the 31st January following the tax year in which the distribution is made.

(3)If on a claim being made the Inland Revenue are satisfied that relief should be given in order to avoid a double charge to tax, they must direct the giving of such relief by way of amending any assessment, by discharge or repayment of tax, or otherwise, as appears to them appropriate.

(4)Relief under this section is given by setting the amount of the deemed employment payment against the relevant distribution so as to reduce the distribution.

(5)In the case of more than one relevant distribution, the Inland Revenue must exercise the power conferred by this section so as to secure that so far as practicable relief is given by setting the amount of a deemed employment payment—

(a)against relevant distributions of the same tax year before those of other years,

(b)against relevant distributions received by the worker before those received by another person, and

(c)against relevant distributions of earlier years before those of later years.

(6)Where the amount of a relevant distribution is reduced under this section, the amount of any associated tax credit is reduced accordingly.

59Provisions applicable to multiple intermediaries

(1)The provisions of this section apply where in the case of an engagement to which this Chapter applies the arrangements involve more than one relevant intermediary.

(2)All relevant intermediaries in relation to the engagement are jointly and severally liable, subject to subsection (3), to account for any amount required under the PAYE provisions to be deducted from a deemed employment payment treated as made by any of them—

(a)in respect of that engagement, or

(b)in respect of that engagement together with other engagements.

(3)An intermediary is not so liable if it has not received any payment or benefit in respect of that engagement or any such other engagement as is mentioned in subsection (2)(b).

(4)Subsection (5) applies where a payment or benefit has been made or provided, directly or indirectly, from one relevant intermediary to another in respect of the engagement.

(5)In that case, the amount taken into account in relation to any intermediary in step 1 or step 2 of section 54(1) is reduced to such extent as is necessary to avoid double-counting having regard to the amount so taken into account in relation to any other intermediary.

(6)Except as provided by subsections (2) to (5), the provisions of this Chapter apply separately in relation to each relevant intermediary.

(7)In this section “relevant intermediary” means an intermediary in relation to which the conditions specified in section 51, 52 or 53 are met.

60Meaning of “associate”

(1)In this Chapter “associate”—

(a)in relation to an individual, has the meaning given by section 417(3) and (4) of ICTA, subject to the following provisions of this section;

(b)in relation to a company, means a person connected with the company; and

(c)in relation to a partnership, means any associate of a member of the partnership.

(2)Where an individual has an interest in shares or obligations of the company as a beneficiary of an employee benefit trust, the trustees are not regarded as associates of the individual by reason only of that interest except in the following circumstances.

(3)The exception is where—

(a)the individual, either alone or with any one or more associates of the individual, or

(b)any associate of the individual, with or without other such associates,

has at any time on or after 14th March 1989 been the beneficial owner of, or able (directly or through the medium of other companies or by any other indirect means) to control more than 5% of the ordinary share capital of the company.

(4)In subsection (3) “associate” does not include the trustees of an employee benefit trust as a result only of the individual’s having an interest in shares or obligations of the trust.

(5)Sections 549 to 554 (attribution of interests in companies to beneficiaries of employee benefit trusts) apply for the purposes of subsection (3) as they apply for the purposes of the provisions listed in section 549(2).

(6)In this section “employee benefit trust” has the meaning given by sections 550 and 551.

61Interpretation

(1)In this Chapter—

  • “associate” has the meaning given by section 60;

  • “associated company” has the meaning given by section 416 of ICTA;

  • “business” means any trade, profession or vocation and includes a Schedule A business;

  • “company” means a body corporate or unincorporated association, and does not include a partnership;

  • “employer’s national insurance contributions” means secondary Class 1 or Class 1A national insurance contributions;

  • “engagement to which this Chapter applies” has the meaning given by section 49(5);

  • “national insurance contributions” means contributions under Part 1 of SSCBA 1992 or Part 1 of SSCB(NI)A 1992;

  • “PAYE provisions” means the provisions of Part 11 or PAYE regulations;

  • “the relevant engagements” has the meaning given by section 50(4).

(2)References in this Chapter to payments or benefits received or receivable from a partnership or unincorporated association include payments or benefits to which a person is or may be entitled in the person’s capacity as a member of the partnership or association.

(3)For the purposes of this Chapter—

(a)anything done by or in relation to an associate of an intermediary is treated as done by or in relation to the intermediary, and

(b)a payment or other benefit provided to a member of an individual’s family or household is treated as provided to the individual.

(4)For the purposes of this Chapter a man and a woman living together as husband and wife are treated as if they were married to each other.

Part 3Employment income: earnings and benefits etc. treated as earnings

Chapter 1Earnings

62Earnings

(1)This section explains what is meant by “earnings” in the employment income Parts.

(2)In those Parts “earnings”, in relation to an employment, means—

(a)any salary, wages or fee,

(b)any gratuity or other profit or incidental benefit of any kind obtained by the employee if it is money or money’s worth, or

(c)anything else that constitutes an emolument of the employment.

(3)For the purposes of subsection (2) “money’s worth” means something that is—

(a)of direct monetary value to the employee, or

(b)capable of being converted into money or something of direct monetary value to the employee.

(4)Subsection (1) does not affect the operation of statutory provisions that provide for amounts to be treated as earnings (and see section 721(7)).

Chapter 2Taxable benefits: the benefits code

The benefits code

63The benefits code

(1)In the employment income Parts “the benefits code” means—

  • this Chapter,

  • Chapter 3 (expenses payments),

  • Chapter 4 (vouchers and credit-tokens),

  • Chapter 5 (living accommodation),

  • Chapter 6 (cars, vans and related benefits),

  • Chapter 7 (loans),

  • Chapter 8 (notional loans in respect of acquisitions of shares),

  • Chapter 9 (disposals of shares for more than market value),

  • Chapter 10 (residual liability to charge), and

  • Chapter 11 (exclusion of lower-paid employments from parts of benefits code).

(2)If an employment is an excluded employment, the general effect of section 216(1) (provisions not applicable to lower-paid employments) is that only the following Chapters apply to the employment—

  • this Chapter,

  • Chapter 4 (vouchers and credit-tokens),

  • Chapter 5 (living accommodation), and

  • Chapter 11 (exclusion of lower-paid employments from parts of benefits code).

(3)Section 216(5) and (6) explain and restrict the effect of section 216(1).

(4)In the benefits code “excluded employment” means an employment to which the exclusion in section 216(1) applies.

64Relationship between earnings and benefits code

(1)This section applies if, apart from this section, the same benefit would give rise to two amounts (“A” and “B”)—

(a)A being an amount of earnings as defined in Chapter 1 of this Part, and

(b)B being an amount to be treated as earnings under the benefits code.

(2)In such a case—

(a)A constitutes earnings as defined in Chapter 1 of this Part, and

(b)the amount (if any) by which B exceeds A is to be treated as earnings under the benefits code.

(3)This section does not apply in connection with living accommodation to which Chapter 5 of this Part applies.

(4)In that case section 109 applies to determine the relationship between that Chapter and Chapter 1 of this Part.

(5)This section does not apply if section 193 (notional loan where acquisition of shares made for less than market value) applies.

(6)In that case sections 194 (amount of notional loan) and 196 (effects on other income tax charges) apply to determine the relationship between Chapters 1 and 8 of this Part.

65Dispensations relating to benefits within provisions not applicable to lower-paid employment

(1)This section applies for the purposes of the listed provisions where a person (“P”) supplies the Inland Revenue with a statement of the cases and circumstances in which—

(a)payments of a particular character are made to or for any employees, or

(b)benefits or facilities of a particular kind are provided for any employees,

whether they are employees of P or some other person.

(2)The “listed provisions” are the provisions listed in section 216(4) (provisions of the benefits code which do not apply to lower-paid employments).

(3)If the Inland Revenue are satisfied that no additional tax is payable by virtue of the listed provisions by reference to the payments, benefits or facilities mentioned in the statement, they must give P a dispensation under this section.

(4)A “dispensation” is a notice stating that the Inland Revenue agree that no additional tax is payable by virtue of the listed provisions by reference to the payments, benefits or facilities mentioned in the statement supplied by P.

(5)If a dispensation is given under this section, nothing in the listed provisions applies to the payments, or the provision of the benefits or facilities, covered by the dispensation or otherwise has the effect of imposing any additional liability to tax in respect of them.

(6)If in their opinion there is reason to do so, the Inland Revenue may revoke a dispensation by giving a further notice to P.

(7)That notice may revoke the dispensation from—

(a)the date when the dispensation was given, or

(b)a later date specified in the notice.

(8)If the notice revokes the dispensation from the date when the dispensation was given—

(a)any liability to tax that would have arisen if the dispensation had never been given is to be treated as having arisen, and

(b)P and the employees in question must make all the returns which they would have had to make if the dispensation had never been given.

(9)If the notice revokes the dispensation from a later date—

(a)any liability to tax that would have arisen if the dispensation had ceased to have effect on that date is to be treated as having arisen, and

(b)P and the employees in question must make all the returns which they would have had to make if the dispensation had ceased to have effect on that date.

General definitions for benefits code

66Meaning of “employment” and related expressions

(1)In the benefits code—

(a)“employment” means a taxable employment under Part 2, and

(b)“employed”, “employee” and “employer” have corresponding meanings.

(2)Where a Chapter of the benefits code applies in relation to an employee—

(a)references in that Chapter to “the employment” are to the employment of that employee, and

(b)references in that Chapter to “the employer” are to the employer in respect of that employment.

(3)For the purposes of the benefits code an employment is a “taxable employment under Part 2” in a tax year if the earnings from the employment for that year are (or would be if there were any) general earnings to which the charging provisions of Chapter 4 or 5 of Part 2 apply.

(4)In subsection (3)—

(a)the reference to an employment includes employment as a director of a company, and

(b)“earnings” means earnings as defined in Chapter 1 of this Part.

67Meaning of “director” and “full-time working director”

(1)In the benefits code “director” means—

(a)in relation to a company whose affairs are managed by a board of directors or similar body, a member of that body,

(b)in relation to a company whose affairs are managed by a single director or similar person, that director or person, and

(c)in relation to a company whose affairs are managed by the members themselves, a member of the company,

and includes any person in accordance with whose directions or instructions the directors of the company (as defined above) are accustomed to act.

(2)For the purposes of subsection (1) a person is not to be regarded as a person in accordance with whose directions or instructions the directors of the company are accustomed to act merely because the directors act on advice given by that person in a professional capacity.

(3)In the benefits code “full-time working director” means a director who is required to devote substantially the whole of his time to the service of the company in a managerial or technical capacity.

68Meaning of “material interest” in a company

(1)For the purposes of the benefits code a person has a material interest in a company if condition A or B is met.

(2)Condition A is that the person (with or without one or more associates) or any associate of that person (with or without one or more such associates) is—

(a)the beneficial owner of, or

(b)able to control, directly or through the medium of other companies or by any other indirect means,

more than 5% of the ordinary share capital of the company.

(3)Condition B is that, in the case of a close company, the person (with or without one or more associates) or any associate of that person (with or without one or more such associates), possesses or is entitled to acquire, such rights as would—

(a)in the event of the winding-up of the company, or

(b)in any other circumstances,

give an entitlement to receive more than 5% of the assets which would then be available for distribution among the participators.

(4)In this section—

  • “associate” has the meaning given by section 417(3) of ICTA except that, for this purpose, “relative” in section 417(3) has the meaning given by subsection (5) below, and

  • “participator” has the meaning given by section 417(1) of ICTA.

(5)For the purposes of this section a person (“A”) is a relative of another (“B”) if A is—

(a)B’s spouse,

(b)a parent, child or remoter relation in the direct line either of B or of B’s spouse,

(c)a brother or sister of B or of B’s spouse, or

(d)the spouse of a person falling within paragraph (b) or (c).

69Extended meaning of “control”

(1)The definition of “control” in section 840 of ICTA (which is applied for the purposes of this Act by section 719) is extended as follows.

(2)For the purposes of the benefits code that definition applies (with the necessary modifications) in relation to an unincorporated association as it applies in relation to a body corporate.

Chapter 3Taxable benefits: expenses payments

70Sums in respect of expenses

(1)This Chapter applies to a sum paid to an employee in a tax year if the sum—

(a)is paid to the employee in respect of expenses, and

(b)is so paid by reason of the employment.

(2)This Chapter applies to a sum paid away by an employee in a tax year if the sum—

(a)was put at the employee’s disposal in respect of expenses,

(b)was so put by reason of the employment, and

(c)is paid away by the employee in respect of expenses.

(3)For the purposes of this Chapter it does not matter whether the employment is held at the time when the sum is paid or paid away so long as it is held at some point in the tax year in which the sum is paid or paid away.

(4)References in this Chapter to an employee accordingly include a prospective or former employee.

(5)This Chapter does not apply to the extent that the sum constitutes earnings from the employment by virtue of any other provision.

71Meaning of paid or put at disposal by reason of the employment

(1)If an employer pays a sum in respect of expenses to an employee it is to be treated as paid by reason of the employment unless—

(a)the employer is an individual, and

(b)the payment is made in the normal course of the employer’s domestic, family or personal relationships.

(2)If an employer puts a sum at an employee’s disposal in respect of expenses it is to be treated as put at the employee’s disposal by reason of the employment unless—

(a)the employer is an individual, and

(b)the sum is put at the employee’s disposal in the normal course of the employer’s domestic, family or personal relationships.

72Sums in respect of expenses treated as earnings

(1)If this Chapter applies to a sum, the sum is to be treated as earnings from the employment for the tax year in which it is paid or paid away.

(2)Subsection (1) does not prevent the making of a deduction allowed under any of the provisions listed in subsection (3).

(3)The provisions are—

  • section 336 (deductions for expenses: the general rule);

  • section 337 (travel in performance of duties);

  • section 338 (travel for necessary attendance);

  • section 340 (travel between group employments);

  • section 341 (travel at start or finish of overseas employment);

  • section 342 (travel between employments where duties performed abroad);

  • section 343 (deduction for professional membership fees);

  • section 344 (deduction for annual subscriptions);

  • section 346 (deduction for employee liabilities);

  • section 351 (expenses of ministers of religion);

  • section 353 (deductions from earnings charged on remittance).

Chapter 4Taxable benefits: vouchers and credit-tokens

Cash vouchers: introduction

73Cash vouchers to which this Chapter applies

(1)This Chapter applies to a cash voucher provided for an employee by reason of the employment which is received by the employee.

(2)A cash voucher provided for an employee by the employer is to be regarded as provided by reason of the employment unless—

(a)the employer is an individual, and

(b)the provision is made in the normal course of the employer’s domestic, family or personal relationships.

(3)A cash voucher provided for an employee and appropriated to the employee—

(a)by attaching it to a card held for the employee, or

(b)in any other way,

is to be treated for the purposes of this Chapter as having been received by the employee at the time when it is appropriated.

74Provision for, or receipt by, member of employee’s family

For the purposes of this Chapter any reference to a cash voucher being provided for or received by an employee includes a reference to it being provided for or received by a member of the employee’s family.

Meaning of “cash voucher”

75Meaning of “cash voucher”

(1)In this Chapter “cash voucher” means a voucher, stamp or similar document capable of being exchanged for a sum of money which is—

(a)greater than,

(b)equal to, or

(c)not substantially less than,

the expense incurred by the person at whose cost the voucher, stamp or similar document is provided.

(2)For the purposes of subsection (1) it does not matter whether the document—

(a)is also capable of being exchanged for goods or services;

(b)is capable of being exchanged singly or together with other vouchers, stamps, or documents;

(c)is capable of being exchanged immediately or only after a time.

(3)Subsection (1) is subject to section 76 (sickness benefits-related voucher).

76Sickness benefits-related voucher

(1)This section applies where—

(a)the expense incurred by the person at whose cost a voucher, stamp or similar document is provided (“the provision expense”) includes costs to that person of providing sickness benefits (“sickness benefits costs”),

(b)the voucher, stamp or document would be a cash voucher (apart from this section) but for the fact that the sum of money for which it is capable of being exchanged (“the exchange sum”) is substantially less than the provision expense, and

(c)the whole or part of the difference between the exchange sum and the provision expense represents the sickness benefits costs.

(2)The voucher, stamp or document is a cash voucher within the meaning of this Chapter if—

E = PE - D

or

EisnotsubstantiallylessthanPE - D

where—

  • E is the exchange sum,

  • PE is the provision expense, and

  • D is the amount of the difference between E and PE which represents the sickness benefits costs.

(3)In this section “sickness benefits” mean benefits in connection with sickness, personal injury or death.

77Apportionment of cost of provision of voucher

If a person incurs expense in or in connection with the provision of vouchers, stamps or similar documents for two or more employees as members of a group or class, the expense incurred in respect of one of them is to be such part of that expense as is just and reasonable.

Cash vouchers: exceptions

78Voucher made available to public generally

This Chapter does not apply to a cash voucher if—

(a)it is of a kind made available to the public generally, and

(b)it is provided to the employee or a member of the employee’s family on no more favourable terms than to the public generally.

79Voucher issued under approved scheme

(1)This Chapter does not apply to a cash voucher received by an employee if—

(a)it is issued under a scheme, and

(b)at the time when it is received the scheme is a scheme approved by the Inland Revenue for the purposes of this section.

(2)The Inland Revenue must not approve a scheme for the purposes of this section unless they are satisfied that it is practicable for income tax in respect of all payments made in exchange for vouchers issued under the scheme to be deducted in accordance with PAYE regulations.

80Vouchers where payment of sums exempt from tax

This Chapter does not apply to a cash voucher if it is—

(a)a document intended to enable a person to obtain payment of a sum which would not have constituted employment income if paid to the person directly, or

(b)a savings certificate where the accumulated interest payable in respect of it is exempt from tax (or would be so exempt if certain conditions were met).

Benefit of cash voucher treated as earnings

81Benefit of cash voucher treated as earnings

(1)The cash equivalent of the benefit of a cash voucher to which this Chapter applies is to be treated as earnings from the employment for the tax year in which the voucher is received by the employee.

(2)The cash equivalent is the sum of money for which the voucher is capable of being exchanged.

Non-cash vouchers: introduction

82Non-cash vouchers to which this Chapter applies

(1)This Chapter applies to a non-cash voucher provided for an employee by reason of the employment which is received by the employee.

(2)A non-cash voucher provided for an employee by the employer is to be regarded as provided by reason of the employment unless—

(a)the employer is an individual, and

(b)the provision is made in the normal course of the employer’s domestic, family or personal relationships.

(3)A non-cash voucher provided for an employee and appropriated to the employee—

(a)by attaching it to a card held for the employee, or

(b)in any other way,

is to be treated for the purposes of this Chapter as having been received by the employee at the time when it is appropriated.

83Provision for, or receipt by, member of employee’s family

For the purposes of this Chapter any reference to a non-cash voucher being provided for or received by an employee includes a reference to it being provided for or received by a member of the employee’s family.

Meaning of “non-cash voucher”

84Meaning of “non-cash voucher”

(1)In this Chapter “non-cash voucher” means—

(a)a voucher, stamp or similar document or token which is capable of being exchanged for money, goods or services,

(b)a transport voucher, or

(c)a cheque voucher,

but does not include a cash voucher.

(2)For the purposes of subsection (1)(a) it does not matter whether the document or token is capable of being exchanged—

(a)singly or together with other vouchers, stamps, documents or tokens;

(b)immediately or only after a time.

(3)In this Chapter “transport voucher” means a ticket, pass or other document or token intended to enable a person to obtain passenger transport services (whether or not in exchange for it).

(4)In this Chapter “cheque voucher” means a cheque—

(a)provided for an employee, and

(b)intended for use by the employee wholly or mainly for payment for—

(i)particular goods or services, or

(ii)goods or services of one or more particular classes;

and, in relation to a cheque voucher, references to a voucher being exchanged for goods or services are to be read accordingly.

Non-cash voucher: exceptions

85Non-cash voucher made available to public generally

This Chapter does not apply to a non-cash voucher if—

(a)it is of a kind made available to the public generally, and

(b)it is provided to the employee or a member of the employee’s family on no more favourable terms than to the public generally.

86Transport vouchers under pre-26th March 1982 arrangements

(1)This Chapter does not apply to a transport voucher provided for an employee of a passenger transport undertaking under arrangements in operation on 25th March 1982 which meet the condition in subsection (2).

(2)The condition is that the arrangements are intended to enable the employee or a member of the employee’s family to obtain passenger transport services provided by—

(a)the employer,

(b)a subsidiary of the employer,

(c)a body corporate of which the employer is a subsidiary, or

(d)another passenger transport undertaking.

(3)In this section—

  • “passenger transport undertaking” means an undertaking whose business consists wholly or mainly in the carriage of passengers or a subsidiary of such an undertaking, and

  • “subsidiary” means a wholly-owned subsidiary within the meaning of section 736 of the Companies Act 1985 (c. 6).

Benefit of non-cash voucher treated as earnings

87Benefit of non-cash voucher treated as earnings

(1)The cash equivalent of the benefit of a non-cash voucher to which this Chapter applies is to be treated as earnings from the employment for the tax year in which the voucher is received by the employee.

(2)The cash equivalent is the difference between—

(a)the cost of provision, and

(b)any part of that cost made good by the employee to the person incurring it.

(3)In this Chapter the “cost of provision” means, in relation to a non-cash voucher, the expense incurred in or in connection with the provision of—

(a)the voucher, and

(b)the money, goods or services for which it is capable of being exchanged,

by the person at whose cost they are provided.

(4)In the case of a transport voucher, the reference in subsection (3)(b) to the services for which the voucher is capable of being exchanged is to the passenger transport services which may be obtained by using it.

(5)If a person incurs expense in or in connection with the provision of non-cash vouchers for two or more employees as members of a group or class, the expense incurred in respect of one of them is to be such part of that expense as is just and reasonable.

(6)This section is subject to section 89 (reduction for meal vouchers).

88Year in which earnings treated as received

(1)In the case of a non-cash voucher other than a cheque voucher, the amount treated as earnings under section 87 is to be treated as received—

(a)in the tax year in which the cost of provision is incurred, or

(b)if later, in the tax year in which the voucher is received by the employee.

(2)In the case of a cheque voucher, the amount treated as earnings under section 87 is to be treated as received in the tax year in which the voucher is handed over in exchange for money, goods or services.

(3)Where a cheque voucher is posted it is to be treated as handed over at the time of posting.

89Reduction for meal vouchers

(1)This section applies where—

(a)the non-cash voucher is a meal voucher,

(b)it is provided for an employee for use on a working day, and

(c)meal vouchers are made available to all employees (if any) employed by the same employer in lower-paid employment within the meaning of Chapter 11 of this Part (see section 217).

(2)The total of the cash equivalents of the benefit of any meal vouchers so provided is to be reduced by 15p for each working day for which the vouchers are provided.

(3)In this section—

  • “meal voucher” means a non-cash voucher which—

    (a)

    can only be used to obtain meals,

    (b)

    is not transferable, and

    (c)

    is not of the kind in respect of which no liability to income tax arises under section 266(3)(e) (subsidised meals), and

  • “working day” means a day on which the employee is at work.

(4)Section 83 (references to provision for an employee include provision for a member of the employee’s family) does not apply to subsection (1)(b).

Credit-tokens: introduction

90Credit-tokens to which this Chapter applies

(1)This Chapter applies to a credit-token provided for an employee by reason of the employment which is used by the employee to obtain money, goods or services.

(2)A credit-token provided for an employee by the employer is to be regarded as provided by reason of the employment unless—

(a)the employer is an individual, and

(b)the provision is made in the normal course of the employer’s domestic, family or personal relationships.

91Provision for, or use by, member of employee’s family

For the purposes of this Chapter—

(a)any reference to a credit-token being provided for an employee includes a reference to it being provided for a member of the employee’s family, and

(b)use of a credit-token by a member of an employee’s family is to be treated as use of the token by the employee.

Meaning of “credit-token”

92Meaning of “credit-token”

(1)In this Chapter “credit-token” means a credit card, debit card or other card, a token, a document or other object given to a person by another person (“X”) who undertakes—

(a)on the production of it, to supply money, goods or services on credit, or

(b)if a third party (“Y”) supplies money, goods or services on its production, to pay Y for what is supplied.

(2)A card, token, document or other object can be a credit-token even if—

(a)some other action is required in addition to its production in order for the money, goods or services to be supplied;

(b)X in paying Y may take a discount or commission.

(3)For the purposes of this section—

(a)the use of an object given by X to operate a machine provided by X is to be treated as its production to X, and

(b)the use of an object given by X to operate a machine provided by Y is to be treated as its production to Y.

(4)A “credit-token” does not include a cash voucher or a non-cash voucher.

Credit-tokens: exception

93Credit-token made available to public generally

This Chapter does not apply to a credit-token if—

(a)it is of a kind made available to the public generally, and

(b)it is provided to the employee or a member of the employee’s family on no more favourable terms than to the public generally.

Benefit of credit-token treated as earnings

94Benefit of credit-token treated as earnings

(1)On each occasion on which a credit-token to which this Chapter applies is used by the employee in a tax year to obtain money, goods or services, the cash equivalent of the benefit of the token is to be treated as earnings from the employment for that year.

(2)The cash equivalent is the difference between—

(a)the cost of provision, and

(b)any part of that cost made good by the employee to the person incurring it.

(3)In this section the “cost of provision” means the expense incurred—

(a)in or in connection with the provision of the money, goods or services obtained on the occasion in question, and

(b)by the person at whose cost they are provided.

(4)If a person incurs expense in or in connection with the provision of credit-tokens for two or more employees as members of a group or class, the expense incurred in respect of one of them is to be such part of that expense as is just and reasonable.

General supplementary provisions

95Disregard for money, goods or services obtained

(1)This section applies if the cash equivalent of the benefit of a cash voucher, a non-cash voucher or a credit-token—

(a)is to be treated as earnings from an employee’s employment under this Chapter, or

(b)would be so treated but for a dispensation given under section 96.

(2)Money, goods or services obtained—

(a)by the employee or another person in exchange for the cash voucher or non-cash voucher, or

(b)by the employee or a member of the employee’s family by use of the credit-token,

are to be disregarded for the purposes of the Income Tax Acts.

(3)But the goods or services are not to be disregarded for the purposes of applying sections 362 and 363 (deductions where non-cash voucher or credit-token provided).

(4)In the case of a transport voucher, the reference in subsection (2)(a) to the services obtained in exchange for the voucher is to the passenger transport services obtained by using it.

96Dispensations relating to vouchers or credit-tokens

(1)This section applies where a person (“P”) supplies the Inland Revenue with a statement of the cases and circumstances in which—

(a)cash vouchers,

(b)non-cash vouchers, or

(c)credit-tokens,

are provided for employees whether they are the employees of P or some other person.

(2)If the Inland Revenue are satisfied that no additional tax is payable by virtue of this Chapter by reference to the vouchers or credit-tokens mentioned in the statement, they must give P a dispensation under this section.

(3)A “dispensation” is a notice stating that the Inland Revenue agree that no additional tax is payable by virtue of this Chapter by reference to the vouchers or credit-tokens mentioned in the statement supplied by P.

(4)If a dispensation is given under this section, nothing in this Chapter applies to the provision or use of the vouchers or credit-tokens covered by the dispensation.

(5)If in their opinion there is reason to do so, the Inland Revenue may revoke a dispensation by giving a further notice to P.

(6)That notice may revoke the dispensation from—

(a)the date when the dispensation was given, or

(b)a later date specified in the notice.

(7)If the notice revokes the dispensation from the date when the dispensation was given—

(a)any liability to tax that would have arisen if the dispensation had never been given is to be treated as having arisen, and

(b)P and the employees in question must make all the returns which they would have had to make if the dispensation had never been given.

(8)If the notice revokes the dispensation from a later date—

(a)any liability to tax that would have arisen if the dispensation had ceased to have effect on that date is to be treated as having arisen, and

(b)P and the employees in question must make all the returns which they would have had to make if the dispensation had ceased to have effect on that date.

Chapter 5Taxable benefits: living accommodation

Living accommodation

97Living accommodation to which this Chapter applies

(1)This Chapter applies to living accommodation provided for—

(a)an employee, or

(b)a member of an employee’s family or household,

by reason of the employment.

(2)Living accommodation provided for any of those persons by the employer is to be regarded as provided by reason of the employment unless—

(a)the employer is an individual, and

(b)the provision is made in the normal course of the employer’s domestic, family or personal relationships.

Exceptions

98Accommodation provided by local authority

This Chapter does not apply to living accommodation provided for an employee if—

(a)the employer is a local authority,

(b)it is provided for the employee by the authority, and

(c)the terms on which it is provided are no more favourable than those on which similar accommodation is provided by the authority for persons who are not their employees but whose circumstances are otherwise similar to those of the employee.

99Accommodation provided for performance of duties

(1)This Chapter does not apply to living accommodation provided for an employee if it is necessary for the proper performance of the employee’s duties that the employee should reside in it.

(2)This Chapter does not apply to living accommodation provided for an employee if—

(a)it is provided for the better performance of the duties of the employment, and

(b)the employment is one of the kinds of employment in the case of which it is customary for employers to provide living accommodation for employees.

(3)But if the accommodation is provided by a company and the employee (“E”) is a director of the company or of an associated company, the exception in subsection (1) or (2) only applies if, in the case of each company of which E is a director—

(a)E has no material interest in the company, and

(b)either—

(i)E’s employment is as a full-time working director, or

(ii)the company is non-profit-making or is established for charitable purposes only.

(4)“Non-profit-making” means that the company does not carry on a trade and its functions do not consist wholly or mainly in the holding of investments or other property.

(5)A company is “associated” with another if—

(a)one has control of the other, or

(b)both are under the control of the same person.

100Accommodation provided as result of security threat

This Chapter does not apply to living accommodation provided for an employee if—

(a)there is a special threat to the security of the employee,

(b)special security arrangements are in force, and

(c)the employee resides in the accommodation as part of those arrangements.

101Chevening House

This Chapter does not apply to living accommodation provided for an employee if the accommodation is—

(a)Chevening House, or

(b)any other premises held on the trusts of the trust instrument set out in the Schedule to the Chevening Estate Act 1959 (c. 49),

and the employee is a person nominated in accordance with those trusts.

Benefit of living accommodation treated as earnings

102Benefit of living accommodation treated as earnings

(1)If living accommodation to which this Chapter applies is provided in any period—

(a)which consists of the whole or part of a tax year, and

(b)throughout which the employee holds the employment,

the cash equivalent of the benefit of the accommodation is to be treated as earnings from the employment for that year.

(2)In this Chapter that period is referred to as “the taxable period”.

(3)Section 103 indicates how the cash equivalent is calculated.

Calculation of cash equivalent

103Method of calculating cash equivalent

(1)The cash equivalent is calculated—

(a)under section 105 if the cost of providing the living accommodation does not exceed £75,000; and

(b)under section 106 if the cost of providing the living accommodation exceeds £75,000.

(2)Section 104 (general rule) sets out how to calculate the cost of providing living accommodation for the purpose of determining whether or not it exceeds £75,000.

(3)In this Chapter—

  • “annual value”,

  • “person involved in providing accommodation”, and

  • “the property”,

have the meaning given by sections 110 to 113, and “the taxable period” has the meaning given by section 102(2).

104General rule for calculating cost of providing accommodation

For any tax year the cost of providing living accommodation is given by the formula—

A + 1 - P

where—

  • A is any expenditure incurred in acquiring the estate or interest in the property held by a person involved in providing the accommodation,

  • I is any expenditure incurred on improvements to the property which has been incurred before the tax year in question by a person involved in providing the accommodation, and

  • P is so much of any payment or payments made by the employee to a person involved in providing the accommodation as represents—

    (a)

    reimbursement of A or I, or

    (b)

    consideration for the grant to the employee of a tenancy or sub-tenancy of the property.

Accommodation costing £75,000 or less

105Cash equivalent: cost of accommodation not over £75,000

(1)The cash equivalent is to be calculated under this section if the cost of providing the living accommodation does not exceed £75,000.

(2)The cash equivalent is the difference between—

(a)the rental value of the accommodation for the taxable period, and

(b)any sum made good by the employee to the person at whose cost the accommodation is provided that is properly attributable to its provision.

(3)The “rental value of the accommodation” for the taxable period is the rent which would have been payable for that period if the property had been let to the employee at an annual rent equal to the annual value.

(4)But if the person at whose cost the accommodation is provided pays rent for the whole or part of the taxable period at an annual rate greater than the annual value—

(a)subsection (3) does not apply to that period or (as the case may be) that part of it; and

(b)instead the “rental value of the accommodation” for that period or part is the rent payable for it by that person.

(5)If the rental value of the accommodation for the taxable period does not exceed any sum made good by the employee as mentioned in subsection (2)(b), the cash equivalent is nil.

Accommodation costing more than £75,000

106Cash equivalent: cost of accommodation over £75,000

(1)The cash equivalent is calculated under this section if the cost of providing the living accommodation exceeds £75,000.

(2)To calculate the cash equivalent—

  • Step 1

    Calculate the amount that would be the cash equivalent if section 105 applied (cash equivalent: cost of accommodation not over £75,000).

  • Step 2

    Calculate the following amount (“the additional yearly rent”)—

    Formula - ORI multiplied by (C minus £75,000)

    where—

    • ORI is the official rate of interest in force for the purposes of Chapter 7 of this Part (taxable benefits: loans) on 6th April in the tax year, and

    • C is the cost of providing the accommodation calculated—

      (a)

      in accordance with section 104 (general rule for calculating cost of accommodation), or

      (b)

      in a case where section 107 applies (special rule for calculating cost of providing accommodation), in accordance with that section instead.

  • Step 3

    Calculate the rent which would have been payable for the taxable period if the property had been let to the employee at the additional yearly rent calculated under step 2.

  • Step 4

    Calculate the cash equivalent by—

    (a)

    adding together the amounts calculated under steps 1 and 3, and

    (b)

    (if allowed by subsection (3)) subtracting from that total the excess rent paid by the employee.

(3)In step 4—

(a)paragraph (b) only applies if, in respect of the taxable period, the rent paid by the employee in respect of the accommodation to the person providing it exceeds the rental value of the accommodation for that period as set out in section 105(3) or (4)(b), as applicable, and

(b)“the excess rent” means the total amount of that excess.

107Special rule for calculating cost of providing accommodation

(1)This section contains a special rule for calculating the cost of providing living accommodation which—

(a)operates for the purposes of step 2 of section 106(2) (calculating the additional yearly rent), and

(b)accordingly only operates where the cost of provision for the purposes of section 106(1) (as calculated under section 104) exceeds £75,000.

(2)This section applies if, throughout the period of 6 years ending with the date when the employee first occupied the accommodation (“the initial date”), an estate or interest in the property was held by a person involved in providing the accommodation.

It does not matter whether it was the same estate, interest or person throughout.

(3)For any tax year the cost of providing the living accommodation for the purposes mentioned in subsection (1)(a) is given by the formula—

MV + I - P

where—

  • MV is the price which the property might reasonably be expected to have fetched on a sale in the open market with vacant possession as at the initial date,

  • I is any expenditure incurred on improvements to the property which has been incurred during the period—

    (a)

    beginning with the initial date, and

    (b)

    ending with the day before the beginning of the tax year,

    by a person involved in providing the accommodation, and

  • P is so much of any payment or payments made by the employee to a person involved in providing the accommodation as represents—

    (a)

    reimbursement (up to an amount not exceeding MV) of any expenditure incurred in acquiring the estate or interest in the property held on the initial date,

    (b)

    reimbursement of I, or

    (c)

    consideration for the grant to the employee of a tenancy or sub-tenancy of the property.

(4)In estimating MV no reduction is to be made for an option in respect of the property held by—

(a)the employee,

(b)a person connected with the employee, or

(c)a person involved in providing the accommodation.

Apportionment of cash equivalent

108Cash equivalent: accommodation provided for more than one employee

(1)If, for the whole or part of a tax year, the same living accommodation is provided for more than one employee at the same time, the total of the cash equivalents for all of the employees is to be limited to the amount that would be the cash equivalent if the accommodation was provided for one employee.

(2)The cash equivalent for each of the employees is to be such part of that amount as is just and reasonable.

Other tax implications

109Priority of this Chapter over Chapter 1 of this Part

(1)This section applies if—

(a)under this Chapter the cash equivalent of the benefit of living accommodation is to be treated as earnings from an employee’s employment for a tax year, and

(b)under Chapter 1 of this Part an amount would, apart from this section, constitute earnings from the employment for the year in respect of the provision of the accommodation.

(2)The full amount of the cash equivalent is to be treated as earnings from the employment for that year under this Chapter.

(3)The amount mentioned in subsection (1)(b) is to constitute earnings from the employment for the year under Chapter 1 of this Part only to the extent that it exceeds the amount mentioned in subsection (2).

Supplementary

110Meaning of “annual value”

(1)For the purposes of this Chapter the “annual value” of living accommodation is the rent which might reasonably be expected to be obtained on a letting from year to year if—

(a)the tenant undertook to pay all taxes, rates and charges usually paid by a tenant, and

(b)the landlord undertook to bear the costs of the repairs and insurance and the other expenses (if any) necessary for maintaining the property in a state to command that rent.

(2)For the purposes of subsection (1) that rent—

(a)is to be taken to be the amount that might reasonably be expected to be so obtained in respect of the letting of the accommodation, and

(b)is to be calculated on the basis that the only amounts that may be deducted in respect of services provided by the landlord are amounts in respect of the cost to the landlord of providing any relevant services.

(3)If living accommodation is of a kind that might reasonably be expected to be let on terms under which—

(a)the landlord is to provide any services which are either—

(i)relevant services, or

(ii)the repair, insurance or maintenance of any premises which do not form part of the accommodation but belong to or are occupied by the landlord, and

(b)amounts are payable in respect of the services in addition to the rent,

the rent to be established under subsection (1) in respect of the accommodation is to be increased under subsection (4).

(4)That rent is to include—

(a)where the services are relevant services, so much of the additional amounts as exceeds the cost to the landlord of providing the services;

(b)where the services are within subsection (3)(a)(ii), the whole of the additional amounts.

(5)In this section “relevant service” means a service other than the repair, insurance or maintenance of the accommodation or of any other premises.

111Disputes as to annual value

(1)This section applies if there is a dispute as to the amount of the annual value of living accommodation for the purposes of this Chapter.

(2)The question is to be determined by the General Commissioners.

(3)The Commissioners must hear and determine the question in the same way as an appeal.

112Meaning of “person involved in providing the accommodation”

For the purposes of this Chapter “person involved in providing the accommodation” means any of the following—

(a)the person providing the accommodation;

(b)the employee’s employer (if not within paragraph (a));

(c)any person, other than the employee, who is connected with a person within paragraph (a) or (b).

113Meaning of “the property”

For the purposes of this Chapter “the property”, in relation to living accommodation, means the property consisting of that accommodation.

Chapter 6Taxable benefits: cars, vans and related benefits

General

114Cars, vans and related benefits

(1)This Chapter applies to a car or a van in relation to a particular tax year if in that year the car or van—

(a)is made available (without any transfer of the property in it) to an employee or a member of the employee’s family or household,

(b)is so made available by reason of the employment (see section 117), and

(c)is available for the employee’s or member’s private use (see section 118).

(2)Where this Chapter applies to a car or van—

(a)sections 120 to 148 provide for the cash equivalent of the benefit of the car to be treated as earnings,

(b)sections 149 to 153 provide for the cash equivalent of the benefit of any fuel provided for the car to be treated as earnings, and

(c)sections 154 to 166 provide for the cash equivalent of the benefit of the van to be treated as earnings.

(3)This Chapter does not apply if an amount constitutes earnings from the employment in respect of the benefit of the car or van by virtue of any other provision (see section 119).

(4)The following provisions of this Chapter provide for further exceptions—

  • section 167 (pooled cars);

  • section 168 (pooled vans);

  • section 169 (car available to more than one member of family or household employed by same employer).

115Meaning of “car” and “van”

(1)In this Chapter—

  • “car” means a mechanically propelled road vehicle which is not—

    (a)

    a goods vehicle,

    (b)

    a motor cycle,

    (c)

    an invalid carriage, or

    (d)

    a vehicle of a type not commonly used as a private vehicle and unsuitable to be so used;

  • “van” means a mechanically propelled road vehicle which—

    (a)

    is a goods vehicle, and

    (b)

    has a design weight not exceeding 3,500 kilograms,

    and which is not a motor cycle.

(2)For the purposes of subsection (1)—

  • “design weight” means the weight which a vehicle is designed or adapted not to exceed when in normal use and travelling on a road laden;

  • “goods vehicle” means a vehicle of a construction primarily suited for the conveyance of goods or burden of any description;

  • “invalid carriage” has the meaning given by section 185(1) of the Road Traffic Act 1988 (c. 52);

  • “motor cycle” has the meaning given by section 185(1) of the Road Traffic Act 1988.

116Meaning of when car or van is available to employee

(1)For the purposes of this Chapter a car or van is available to an employee at a particular time if it is then made available, by reason of the employment and without any transfer of the property in it, to the employee or a member of the employee’s family or household.

(2)References in this Chapter to—

(a)the time when a car is first made available to an employee are to the earliest time when the car is made available as mentioned in subsection (1), and

(b)the last day in a year on which a car is available to an employee are to the last day in the year on which the car is made available as mentioned in subsection (1).

(3)This section does not apply to section 138 (automatic car for a disabled employee).

117Meaning of car or van made available by reason of employment

For the purposes of this Chapter a car or van made available by an employer to an employee or a member of the employee’s family or household is to be regarded as made available by reason of the employment unless—

(a)the employer is an individual, and

(b)it is so made available in the normal course of the employer’s domestic, family or personal relationships.

118Availability for private use

(1)For the purposes of this Chapter a car or van made available in a tax year to an employee or a member of the employee’s family or household is to be treated as available for the employee’s or member’s private use unless in that year—

(a)the terms on which it is made available prohibit such use, and

(b)it is not so used.

(2)In this Chapter “private use”, in relation to a car or van made available to an employee or a member of the employee’s family or household, means any use other than for the employee’s business travel (see section 171(1)).

119Where alternative to benefit of car offered

(1)This section applies where in a tax year—

(a)a car is made available as mentioned in section 114(1), and

(b)an alternative to the benefit of the car is offered.

(2)The mere fact that the alternative is offered does not result in an amount in respect of the benefit constituting earnings by virtue of Chapter 1 of this Part (earnings).

Cars: benefit treated as earnings

120Benefit of car treated as earnings

(1)If this Chapter applies to a car in relation to a particular tax year, the cash equivalent of the benefit of the car is to be treated as earnings from the employment for that year.

(2)In such a case the employee is referred to in this Chapter as being chargeable to tax in respect of the car in that year.

121Method of calculating the cash equivalent of the benefit of a car

(1)The cash equivalent of the benefit of a car for a tax year is calculated as follows—

  • Step 1

    Find the price of the car in accordance with sections 122 to 124.

  • Step 2

    Add the price of any accessories which fall to be taken into account in accordance with sections 125 to 131.

  • Step 3

    Make any deduction under section 132 for capital contributions made by the employee to the cost of the car or accessories.

  • Step 4

    If the amount carried forward from step 3 exceeds £80,000, the interim sum is £80,000.

    In any other case, the interim sum is the amount carried forward from step 3.

  • Step 5

    Find the appropriate percentage for the car for the year in accordance with sections 133 to 142.

  • Step 6

    Multiply the interim sum by the appropriate percentage for the car for the year.

  • Step 7

    Make any deduction under section 143 for any periods when the car was unavailable.

    The resulting amount is the provisional sum.

  • Step 8

    Make any deduction from the provisional sum under section 144 in respect of payments by the employee for the private use of the car.

    The result is the cash equivalent of the benefit of the car for the year.

(2)The method of calculation set out in subsection (1) is modified in the special cases dealt with in—

  • section 146 (cars that run on road fuel gas), and

  • section 147 (classic cars: 15 years of age or more).

(3)The cash equivalent may be reduced under section 148 where the car is shared.

Cars: the price of a car

122The price of the car

For the purposes of this Chapter the price of a car means—

(a)its list price, if it has one, or

(b)its notional price, if it has no list price.

123The list price of a car

(1)In this Chapter a car’s “list price” means the price published by the car’s manufacturer, importer or distributor (as the case may be) as the inclusive price appropriate for a car of that kind if sold—

(a)in the United Kingdom,

(b)singly,

(c)in a retail sale,

(d)in the open market, and

(e)on the day immediately before the date of the car’s first registration.

(2)The “inclusive price” means the price inclusive of—

(a)any charge for delivery by the manufacturer, importer or distributor to the seller’s place of business, and

(b)any relevant taxes (see section 171(1)).

124The notional price of a car with no list price

(1)In this Chapter a car’s “notional price” means the price which might reasonably have been expected to be its list price if its manufacturer, importer or distributor (as the case may be) had published a price as the inclusive price appropriate for a sale of a car of the same kind sold—

(a)in the United Kingdom,

(b)singly,

(c)in a retail sale,

(d)in the open market,

(e)on the day immediately before the date of the car’s first registration, and

(f)with accessories equivalent to the qualifying accessories (see section 125) available with the car at the time when it was first made available to the employee.

(2)In this section “inclusive price” has the same meaning as in section 123.

Cars: treatment of accessories

125Meaning of “accessory” and related terms

(1)In this Chapter “qualifying accessory” means an accessory which—

(a)is made available for use with the car without any transfer of the property in the accessory,

(b)is made available by reason of the employment, and

(c)is attached to the car (whether permanently or not).

(2)For the purposes of this Chapter “accessory” includes any kind of equipment but does not include—

(a)equipment necessarily provided for use in the performance of the duties of the employment;

(b)equipment by means of which a car is capable of running on road fuel gas;

(c)equipment to enable a disabled person to use a car (see section 172);

(d)a mobile telephone (within the meaning given in section 319(2)).

(3)But subsection (2)(b) does not apply in relation to a car to which section 137 (different CO2 emissions figure for bi-fuel cars) applies.

(4)In this Chapter—

  • “standard accessory” means an accessory equivalent to an accessory assumed to be available with cars of the same kind as the car in question in arriving at the list price, and

  • “non-standard accessory” means any other accessory.

126Amounts taken into account in respect of accessories

(1)The price of the following accessories is to be taken into account under step 2 of section 121(1)—

(a)in the case of a car with a list price, the price of any initial extra accessory, and

(b)in the case of any car, the price of any later accessory.

(2)In this Chapter an “initial extra accessory” means a qualifying accessory which—

(a)is a non-standard accessory,

(b)is available with the car at the time when it is first made available to the employee, and

(c)if it is an accessory in relation to which there is no published price of the manufacturer, importer or distributor of the car (see section 128), is available with the car in the tax year in question.

(3)In this Chapter a “later accessory” means a qualifying accessory which—

(a)is available with the car in the tax year in question,

(b)was not available with the car at the time when it was first made available to the employee,

(c)was not made available with the car before 1st August 1993, and

(d)has a price of at least £100.

(4)In this section references to the price of an accessory are to—

(a)its list price, if it has one, or

(b)its notional price, if it has no list price.

(5)This section is subject to section 131 (replacement accessories).

127The list price of an accessory

(1)For the purposes of this Chapter the list price of an initial extra accessory is—

(a)the published price of the manufacturer, importer or distributor of the car (see section 128), or

(b)if there is no such price, the published price of the manufacturer, importer or distributor of the accessory (see section 129).

(2)For the purposes of this Chapter the list price of a later accessory is the published price of the manufacturer, importer or distributor of the accessory (see section 129).

128Accessory: published price of the car manufacturer etc.

(1)In this Chapter the “published price of the manufacturer, importer or distributor of the car” in relation to an accessory means the price published by the car’s manufacturer, importer or distributor (as the case may be) as the inclusive price appropriate for an equivalent accessory if sold with a car of the same kind—

(a)in the United Kingdom,

(b)singly,

(c)in a retail sale,

(d)in the open market, and

(e)on the day immediately before the date of the car’s first registration.

(2)The “inclusive price” means the price inclusive of—

(a)any charge for delivery by the manufacturer, importer or distributor to the seller’s place of business,

(b)any relevant taxes other than car tax (see section 171(1)), and

(c)any charge for fitting the accessory.

129Accessory: published price of the accessory manufacturer etc.

(1)In this Chapter the “published price of the manufacturer, importer or distributor of the accessory” in relation to an accessory means the price published by or on behalf of the manufacturer, importer or distributor of the accessory (as the case may be) as the inclusive price appropriate for such an accessory if sold—

(a)in the United Kingdom,

(b)singly,

(c)in a retail sale,

(d)in the open market, and

(e)at the time immediately before the accessory concerned is first made available for use with the car.

(2)The “inclusive price” means the price inclusive of—

(a)any charge for delivery by the manufacturer, importer or distributor to the seller’s place of business,

(b)any relevant taxes other than car tax (see section 171(1)), and

(c)in the case of an accessory permanently attached to the car, the price which the seller would charge for attaching it.

(3)In the case of an initial extra accessory, the time referred to in subsection (1)(e) may be a time before the car is first made available to the employee.

130The notional price of an accessory

(1)In this Chapter the “notional price” of an accessory means the inclusive price which it might reasonably have been expected to fetch if sold—

(a)in the United Kingdom,

(b)singly,

(c)in a retail sale,

(d)in the open market, and

(e)at the time immediately before the accessory concerned is first made available for use with the car.

(2)The “inclusive price” means the price inclusive of—

(a)any charge for delivery by the manufacturer, importer or distributor to the seller’s place of business,

(b)any relevant taxes other than car tax (see section 171(1)), and

(c)in the case of an accessory permanently attached to the car, the price which the seller would charge for attaching it.

(3)In the case of an initial extra accessory, the time referred to in subsection (1)(e) may be a time before the car is first made available to the employee.

131Replacement accessories

(1)This section applies where—

(a)a later accessory is available with the car in the tax year in question,

(b)that accessory (“the new accessory”) replaced another qualifying accessory (“the old accessory”) in that year or an earlier tax year, and

(c)the new accessory is of the same kind as the old accessory.

(2)If the new accessory is not superior to the old accessory, the cash equivalent of the benefit of the car for the tax year is to be calculated under step 2 of section 121(1) as if—

(a)the replacement has not been made, and

(b)the new accessory is a continuation of the old accessory.

(3)If the new accessory is superior to the old accessory and the conditions in subsection (4) are met, the cash equivalent of the benefit of the car for the tax year is to be calculated under step 2 of section 121(1)—

(a)as if the old accessory was not available with the car in that tax year, or

(b)where the price of the old accessory would (apart from this section) be added to the price of the car under step 2 of section 121(1) as an initial extra accessory, as if it was not available with the car at the time when the car was first made available to the employee.

(4)The conditions mentioned in subsection (3) are that—

(a)the old accessory was a non-standard accessory, and

(b)both the old and the new accessory would (apart from this section) be taken into account under step 2 of section 121(1) in calculating the cash equivalent of the benefit of the car for the year.

(5)For the purposes of this section a new accessory is superior to an old accessory if the price of the new accessory exceeds whichever is the greater of—

(a)the price of the old accessory, and

(b)the price of an accessory equivalent to the old accessory at the time immediately before the new accessory is first made available for use with the car.

(6)In this section references to the price of an accessory are to—

(a)its list price, if it has one, or

(b)its notional price, if it has no list price.

Cars: capital contributions by employee

132Capital contributions by employee

(1)This section applies if the employee contributes a capital sum to expenditure on the provision of—

(a)the car, or

(b)any qualifying accessory which is taken into account in calculating the cash equivalent of the benefit of the car.

(2)A deduction is to be made from the amount carried forward from step 2 of section 121(1)—

(a)for the tax year in which the contribution is made, and

(b)for all subsequent years in which the employee is chargeable to tax in respect of the car by virtue of section 120.

(3)The amount of the deduction allowed in any tax year is the lesser of—

(a)the total of the capital sums contributed by the employee in that year and any earlier years to expenditure on the provision of—

(i)the car, or

(ii)any qualifying accessory which is taken into account in calculating the cash equivalent of the benefit of the car for the tax year in question, and

(b)£5,000.

Cars: the appropriate percentage

133How to determine the “appropriate percentage”

(1)The “appropriate percentage” for a car for a year depends upon when the car was first registered.

(2)If the car was first registered on or after 1st January 1998, the “appropriate percentage” depends upon whether the car—

(a)is a car with a CO2 emissions figure (see section 134(1)),

(b)is a car without a CO2 emissions figure (see section 134(2)), or

(c)is a diesel car to which section 141 applies,

and is determined under sections 139 to 141.

(3)If the car was first registered before 1st January 1998, the “appropriate percentage” is determined under section 142.

134Meaning of car with or without a CO2 emissions figure

(1)In this Chapter a “car with a CO2 emissions figure” means—

(a)a car first registered on or after 1st January 1998 but before 1st October 1999 to which section 135 applies,

(b)a car first registered on or after 1st October 1999 to which section 136 applies, or

(c)a car first registered on or after 1st January 2000 which is a car to which section 137 (bi-fuel cars) applies.

(2)In this Chapter a “car without a CO2 emissions figure” means any other car first registered on or after 1st January 1998.

Cars: appropriate percentage: first registered on or after 1st January 1998

135Car with a CO2 emissions figure: pre-October 1999 registration

(1)This section applies to a car first registered on or after 1st January 1998 but before 1st October 1999 if when it was so registered—

(a)it conformed to a vehicle type with an EC type-approval certificate (see section 171(1)), or

(b)it had a UK approval certificate (see section 171(1)),

which specifies a CO2 emissions figure in terms of grams per kilometre driven.

(2)The car’s CO2 emissions figure is that specified figure.

(3)This is subject to section 138 (automatic car for a disabled employee).

136Car with a CO2 emissions figure: post-September 1999 registration

(1)This section applies to a car first registered on or after 1st October 1999 if it is so registered on the basis of—

(a)an EC certificate of conformity (see section 171(1)), or

(b)a UK approval certificate (see section 171(1)),

which specifies a CO2 emissions figure in terms of grams per kilometre driven.

(2)The car’s CO2 emissions figure is that specified figure unless more than one figure is specified, in which case the car’s CO2 emissions figure is the figure specified as the CO2 emissions (combined) figure.

(3)This is subject to—

(a)section 137 (bi-fuel cars), and

(b)section 138 (automatic car for a disabled employee).

137Car with a CO2 emissions figure: bi-fuel cars

(1)This section applies to a car first registered on or after 1st January 2000 if it is so registered on the basis of—

(a)an EC certificate of conformity (see section 171(1)), or

(b)a UK approval certificate (see section 171(1)),

which specifies separate CO2 emissions figures in terms of grams per kilometre driven for different fuels.

(2)The car’s CO2 emissions figure is—

(a)the lowest figure specified, or

(b)if there is more than one figure specified in relation to each fuel, the lowest CO2 emissions (combined) figure specified.

(3)This is subject to section 138 (automatic car for a disabled employee).

138Car with a CO2 emissions figure: automatic car for a disabled employee

(1)This section applies where—

(a)a car with a CO2 emissions figure has automatic transmission (“the automatic car”),

(b)at any time in the year when the automatic car is available to the employee (“E”), E holds a disabled person’s badge, and

(c)by reason of E’s disability, E must, in the event of wanting to drive a car, drive a car which has automatic transmission.

(2)If, under sections 135 to 137, the automatic car’s CO2 emissions figure is more than it would have been if the automatic car had been an equivalent manual car, the CO2 emissions figure for the automatic car is to be the CO2 emissions figure for an equivalent manual car.

(3)In subsection (2) “an equivalent manual car” means a car which—

(a)is first registered at or about the same time as the automatic car, and

(b)does not have automatic transmission, but otherwise is the closest variant available of the make and model of the automatic car.

(4)For the purposes of this section a car has automatic transmission if—

(a)the driver of the car is not provided with any means by which the driver may vary the gear ratio between the engine and the road wheels independently of the accelerator and the brakes, or

(b)the driver is provided with such means, but they do not include—

(i)a clutch pedal, or

(ii)a lever which the driver may operate manually.

(5)For the purposes of this section a car is available to an employee at a particular time if it is then made available, by reason of the employment and without any transfer of the property in it, to the employee.

139Car with a CO2 emissions figure: the appropriate percentage

(1)The appropriate percentage for a year for a car with a CO2 emissions figure depends upon whether the car’s CO2 emissions figure exceeds the lower threshold for that year.

(2)If the car’s CO2 emissions figure does not exceed the lower threshold for the year, the appropriate percentage for the year is 15% (“the basic percentage”).

(3)If the car’s CO2 emissions figure does exceed the lower threshold for the year, the appropriate percentage for the year is whichever is the lesser of—

(a)the basic percentage increased by one percentage point for each 5 grams per kilometre by which the CO2 emissions figure exceeds the lower threshold for the year, and

(b)35%.

(4)The lower threshold is—

Table
Tax yearLower threshold (in g/km)
2003-04155
2004-05 and subsequent tax years145

(5)If the car’s CO2 emissions figure is not a multiple of 5, it is to be rounded down to the nearest multiple of 5 for the purposes of this section.

(6)This section is subject to—

(a)section 141 (diesel cars), and

(b)any regulations made by the Treasury under section 170(4) (power to reduce the appropriate percentage).

140Car without a CO2 emissions figure: the appropriate percentage

(1)The appropriate percentage for a year for a car without a CO2 emissions figure is determined under this section.

(2)If the car has an internal combustion engine with one or more reciprocating pistons, the appropriate percentage for the year is—

Table
Cylinder capacity of car in cubic centimetresAppropriate percentage
1,400 or less15%
More than 1,400 but not more than 2,00025%
More than 2,00035%

For this purpose a car’s cylinder capacity is the capacity of its engine as calculated for the purposes of VERA 1994.

(3)If subsection (2) does not apply, the appropriate percentage for the year is—

(a)15%, if the car is an electrically propelled vehicle, and

(b)35%, in any other case.

(4)For the purposes of this section a vehicle is not an electrically propelled vehicle unless—

(a)it is propelled solely by electrical power, and

(b)that power is derived from—

(i)a source external to the vehicle, or

(ii)an electrical storage battery which is not connected to any source of power when the vehicle is in motion.

(5)This section is subject to—

(a)section 141 (diesel cars), and

(b)any regulations made by the Treasury under section 170(4) (power to reduce the appropriate percentage).

141Diesel cars: the appropriate percentage

(1)This section applies to a diesel car first registered on or after 1st January 1998.

(2)To determine the appropriate percentage for such a car for a year—

  • Step 1

    Determine whether the car is a car with a CO2 emissions figure or a car without a CO2 emissions figure (see section 134).

  • Step 2

    Take what would be the appropriate percentage for the car for the year under section 139 or 140 as appropriate.

  • Step 3

    The appropriate percentage for the car for the year is whichever is the smaller of—

    (a)

    the figure resulting from the addition of 3 percentage points to the figure found under step 2, and

    (b)

    35%.

(3)In this section “diesel car” means a car which is propelled solely by diesel.

(4)This section is subject to any regulations made by the Treasury under section 170(4) (power to reduce the appropriate percentage).

Cars: appropriate percentage: first registered before 1st January 1998

142Car first registered before 1st January 1998: the appropriate percentage

(1)The appropriate percentage for a car first registered before 1st January 1998 is determined under this section.

(2)If the car has an internal combustion engine with one or more reciprocating pistons, the appropriate percentage for the year is—

Table
Cylinder capacity of car in cubic centimetresAppropriate percentage
1,400 or less15%
More than 1,400 but not more than 2,00022%
More than 2,00032%

For this purpose a car’s cylinder capacity is the capacity of its engine as calculated for the purposes of VERA 1994.

(3)If subsection (2) does not apply, the appropriate percentage for the year is—

(a)15%, if the car is an electrically propelled vehicle, and

(b)32%, in any other case.

(4)For the purposes of this section a vehicle is not an electrically propelled vehicle unless—

(a)it is propelled solely by electrical power, and

(b)that power is derived from—

(i)a source external to the vehicle, or

(ii)an electrical storage battery which is not connected to any source of power when the vehicle is in motion.

Cars: unavailability or payments for private use

143Deduction for periods when car unavailable

(1)A deduction is to be made from the amount carried forward from step 6 of section 121(1) if the car has been unavailable on any day during the tax year in question.

(2)For the purposes of this section a car is unavailable on any day if the day—

(a)falls before the first day on which the car is available to the employee,

(b)falls after the last day on which the car is available to the employee, or

(c)falls within a period of 30 days or more throughout which the car is not available to the employee.

(3)The amount of the deduction is given by the formula—

Formula - U divided by Y multiplied by A

where—

  • U is the number of days in the year on which the car is unavailable,

  • Y is the number of days in that year, and

  • A is the amount carried forward from step 6.

(4)This section is subject to section 145 (modification where car temporarily replaced).

144Deduction for payments for private use

(1)A deduction is to be made from the provisional sum calculated under step 7 of section 121(1) if, as a condition of the car being available for the employee’s private use, the employee—

(a)is required in the tax year in question to pay (whether by way of deduction from earnings or otherwise) an amount of money for that use, and

(b)makes such payment.

(2)If the amount paid by the employee in respect of that year is equal to or exceeds the provisional sum, the provisional sum is reduced so that the cash equivalent of the benefit of the car for that year is nil.

(3)In any other case the amount paid by the employee in respect of the year is deducted from the provisional sum in order to give the cash equivalent of the benefit of the car for that year.

(4)In this section the reference to the car being available for the employee’s private use includes a reference to the car being available for the private use of a member of the employee’s family or household.

(5)This section is subject to section 145 (modification where car temporarily replaced).

145Modification of provisions where car temporarily replaced

(1)This section applies if—

(a)the car normally available to an employee (“the normal car”) is not available to the employee for a period of less than 30 days,

(b)another car (“the replacement car”) is made available to the employee in order to replace the normal car for the whole or part of that period,

(c)the employee is chargeable to tax in respect of both the normal car and the replacement car by virtue of section 120, and

(d)the replacement car meets condition A or B.

(2)Condition A is met if the replacement car is not materially better than the normal car.

(3)Condition B is met if the replacement car is not made available to the employee under an arrangement of which the main purpose, or one of the main purposes, is to provide the employee with the benefit of a car which is materially better than the normal car.

(4)If this section applies—

(a)section 143 (deduction for periods when car unavailable) applies so that the replacement car is to be treated as unavailable on the days of the period during which it replaces the normal car, and

(b)section 144 (deduction for payments for private use) applies as if the replacement had not been made and the replacement car were a continuation of the normal car.

(5)A replacement car is regarded as materially better than the normal car if—

(a)it is materially better in quality, or

(b)when calculating the cash equivalent of the benefit of the replacement car, the interim sum calculated under step 4 of section 121(1) is materially higher than the interim sum calculated in relation to the normal car.

Cars: special cases

146Cars that run on road fuel gas

(1)This section applies if the car—

(a)has been manufactured so as to be capable of running on road fuel gas, and

(b)is not a car to which section 137 (different CO2 emissions figure for bi-fuel cars) applies.

(2)The price of the car found under step 1 of section 121(1) is to be reduced by so much of that price as it is reasonable to attribute to the car being manufactured in such a way as to be capable of running on road fuel gas rather than in such a way as to be capable of running only on petrol.

147Classic cars: 15 years of age or more

(1)This section applies in calculating the cash equivalent of the benefit of a car for a tax year if—

(a)the age of the car at the end of the year is 15 years or more,

(b)the market value of the car for the year is £15,000 or more, and

(c)that market value exceeds the amount carried forward from step 3 of section 121(1).

(2)For the amount carried forward from step 3 substitute the market value of the car for the tax year in question less any deductions under subsection (6).

(3)The market value of a car for a tax year is the price which the car might reasonably have been expected to fetch on a sale in the open market on—

(a)the last day of that year, or

(b)the last day in that year on which the car is available to the employee if that is earlier.

(4)It is assumed that any qualifying accessories available with the car on that day are included in the sale.

(5)Subsection (6) applies if the employee contributes a capital sum to expenditure on the provision of—

(a)the car, or

(b)any qualifying accessory which is taken into account in determining the market value of the car.

(6)A deduction is to be made from the market value of the car—

(a)for the tax year in which the contribution is made, and

(b)for all subsequent years in which the employee is chargeable to tax in respect of the car by virtue of section 120.

(7)The amount of the deduction allowed in any tax year is the lesser of—

(a)the total of the capital sums contributed by the employee in that year and any earlier years to expenditure on the provision of—

(i)the car, or

(ii)any qualifying accessory which is taken into account in determining the market value of the car for the tax year in question, and

(b)£5,000.

Cars: reduction where shared car

148Reduction of cash equivalent where car is shared

(1)This section applies if in a tax year a car—

(a)is available to more than one employee concurrently,

(b)is so made available by the same employer, and

(c)is available concurrently for each employee’s private use,

and two or more of those employees are chargeable to tax in respect of the car in that year by virtue of section 120.

(2)The cash equivalent of the benefit of the car to each of those employees for that year—

(a)is to be calculated separately under section 121, and

(b)is then to be reduced on a just and reasonable basis.

(3)If the employment of any of the employees mentioned in subsection (1)(a) is an excluded employment, the availability of the car to that employee is to be disregarded for the purposes of subsection (2)(b).

(4)In this section the reference to the car being available for each employee’s private use includes a reference to the car being available for the private use of a member of the employee’s family or household.

Car fuel: benefit treated as earnings

149Benefit of car fuel treated as earnings

(1)If in a tax year—

(a)fuel is provided for a car by reason of an employee’s employment, and

(b)that person is chargeable to tax in respect of the car by virtue of section 120,

the cash equivalent of the benefit of the fuel is to be treated as earnings from the employment for that year.

(2)The cash equivalent of the benefit of the fuel is calculated in accordance with sections 150 to 153.

(3)Fuel is to be treated as provided for a car, in addition to any other way in which it may be provided, if—

(a)any liability in respect of the provision of fuel for the car is discharged,

(b)a non-cash voucher or a credit-token is used to obtain fuel for the car,

(c)a non-cash voucher or a credit-token is used to obtain money which is spent on fuel for the car, or

(d)any sum is paid in respect of expenses incurred in providing fuel for the car.

(4)References in this section to fuel do not include any facility or means for supplying electrical energy for an electrically propelled vehicle.

150Car fuel: calculating the cash equivalent

(1)The cash equivalent of the benefit of the fuel is the appropriate percentage of £14,400.

(2)The “appropriate percentage” means the appropriate percentage determined in accordance with sections 133 to 142 for the purpose of calculating the cash equivalent of the benefit of the car for which the fuel is provided.

(3)But the cash equivalent may be—

(a)nil where either of the conditions in section 151 is met;

(b)proportionately reduced under section 152;

(c)reduced under section 153.

151Car fuel: nil cash equivalent

(1)The cash equivalent of the benefit of the fuel is nil if condition A or B is met.

(2)Condition A is met if in the tax year in question—

(a)the employee is required to make good to the person providing the fuel the whole of the expense incurred by that person in connection with the provision of the fuel for the employee’s private use, and

(b)the employee does make good that expense.

(3)Condition B is met if in the tax year in question the fuel is made available only for business travel (see section 171(1)).

152Car fuel: proportionate reduction of cash equivalent

(1)The cash equivalent of the benefit of the fuel is to be proportionately reduced if for any part of the tax year in question the car for which the fuel is provided is unavailable (within the meaning of section 143 (deduction for periods when car unavailable)).

(2)The cash equivalent of the benefit of the fuel is also to be proportionately reduced if for any part of the tax year in question—

(a)the facility for the provision of fuel as mentioned in section 149(1) is not available,

(b)the fuel is made available only for business travel (see section 171(1)), or

(c)the employee is required to make good to the person providing the fuel the whole of the expense incurred by that person in connection with the provision of the fuel for the employee’s private use and the employee does make good that expense.

(3)The fact that any of the conditions specified in subsection (2) is met for part of a tax year is to be disregarded if there is a time later in that year when none of those conditions is met.

(4)Where the cash equivalent is to be proportionately reduced under subsection (1) or (2) (or under both those subsections), the reduced amount is given by the formula—

Formula - CE multiplied by (Y minus D) divided by Y

where—

  • CE is the amount of the cash equivalent before any reduction,

  • Y is the number of days in the tax year in question, and

  • D is the total number of days in that year on which either the car is unavailable or one or more of the conditions in subsection (2) is met.

153Car fuel: reduction of cash equivalent

If a reduction of the cash equivalent of the benefit of the car for which the fuel is provided is made under section 148 (reduction of cash equivalent where car is shared), a corresponding reduction is to be made in relation to the cash equivalent of the benefit of the fuel.

Vans: benefit treated as earnings

154Benefit of van treated as earnings

If this Chapter applies to a van in relation to a particular tax year, the cash equivalent of the benefit of the van is to be treated as earnings from the employment for that year.

155Method of calculating the cash equivalent of the benefit of a van

(1)The method of calculation of the cash equivalent of the benefit of a van for a tax year depends upon whether the van is a shared van for the whole or any part of that year.

(2)If the van is not a shared van for the whole or any part of the year, the cash equivalent of the benefit of the van for the year is the value of exclusive availability calculated in accordance with section 157.

(3)If the van is a shared van for the whole of the year, the cash equivalent of the benefit of the van for the year is the value of shared availability calculated in accordance with section 160.

This is subject to subsection (7) where more than one shared van is available to an employee.

(4)If the van is a shared van for only part of the year the cash equivalent of the benefit of the van for the year is the total of—

(a)the value of exclusive availability calculated in accordance with section 157 (for the period when it is not a shared van), and

(b)the value of shared availability calculated in accordance with section 160 (for the period when it is a shared van).

This is subject to subsection (7) where more than one shared van is available to an employee.

(5)The value of shared availability calculated in accordance with section 160 under section 161 (normal calculation) takes account of—

(a)the shared van, and

(b)where that van is made available by the employer, any other vans made available by the employer (whether or not to the employee or a member of the employee’s family or household) which are shared vans for the whole or any part of the tax year in question.

(6)The value of shared availability calculated in accordance with section 160 under section 164 (alternative calculation) takes account of—

(a)the shared van, and

(b)where that van is made available by the employer, any other vans made available by the employer to the employee or a member of the employee’s family or household which are shared vans for the whole or any part of the tax year in question.

(7)Accordingly, if more than one shared van, which is made available by the same employer, is available to an employee in a tax year the total of the cash equivalents in respect of those vans is calculated by—

(a)taking the value of shared availability calculated once in accordance with section 160, and

(b)if any of those vans is a shared van for only part of the year, adding the value of exclusive availability in respect of each of those vans calculated in accordance with section 157.

(8)This section is subject to section 166 (limit of cash equivalent).

156Meaning of “shared van”

(1)For the purposes of sections 155 to 165 a van is a shared van for a period if condition A or B is met.

(2)Condition A is met if throughout the period the van is available concurrently to more than one employee of the same employer.

(3)Condition B is met if—

(a)the period is one throughout which the van is available to different employees of the same employer (a “shared period”), and

(b)the circumstances are such that the employee or employees to whom the van is available at any given time in the period are not necessarily the same as those to whom it is available at any other given time in the period.

(4)But if the van is available to only one employee for a period exceeding 30 days (an “exclusive period”)—

(a)the exclusive period does not count towards any period that would otherwise be a shared period,

(b)the shared period is to be treated as ending when the exclusive period begins, and

(c)a further shared period may begin after the end of the exclusive period.

(5)If a van is a shared van for part of a day, it is to be treated for the purposes of this section as shared throughout that day.

Vans: value of exclusive availability

157Value of exclusive availability

The value of exclusive availability is calculated as follows—

  • Step 1

    Determine the age of the van.

  • Step 2

    If the age of the van is less than 4 years at the end of the tax year in question, the basic value of the van for the year is £500.

    In any other case, the basic value of the van for the year is £350.

  • Step 3

    Make any deduction from the basic value of the van under section 158 for any periods when the van was unavailable or a shared van.

    The resulting amount is the provisional sum.

  • Step 4

    Make any deduction from the provisional sum under section 159 in respect of payments by the employee for the private use of the van.

    The result is the value of exclusive availability.

158Deduction for periods of unavailability or shared use

(1)A deduction is to be made from the basic value of the van calculated under step 2 of section 157 if there are any excluded days during the tax year in question.

(2)In this section an “excluded day” means a day on which—

(a)the van is unavailable (see subsection (4)), or

(b)the van is a shared van.

(3)The amount of the deduction is given by the formula—

Formula - E divided by Y multipled by B

where—

  • E is the number of excluded days in the year,

  • Y is the number of days in the year, and

  • B is the basic value of the van calculated under step 2 of section 157.

(4)For the purposes of this section a van is unavailable on any day if the day—

(a)falls before the first day on which the van is available to the employee,

(b)falls after the last day on which the van is available to the employee, or

(c)falls within a period of 30 days or more throughout which the van is not available to the employee.

159Deduction for payments for private use

(1)A deduction is to be made from the provisional sum calculated under step 3 of section 157 if, as a condition of the van being available for the employee’s private use, the employee—

(a)is required in the tax year in question to pay (whether by way of deduction from earnings or otherwise) an amount of money for that use, and

(b)makes such payment.

(2)If the amount paid by the employee in respect of that year is equal to or exceeds the provisional sum, the provisional sum is reduced so that the value of exclusive availability is nil.

(3)In any other case the amount paid by the employee in respect of the year is deducted from the provisional sum in order to give the value of exclusive availability.

(4)If the van is a shared van for any part of the tax year in question, the reference in subsection (1) to the employee’s private use in that year is to be read as a reference to the employee’s private use in that part of the year when the van is not a shared van.

(5)In this section any reference to the van being available for the employee’s private use includes a reference to the van being available for the private use of a member of the employee’s family or household.

Vans: value of shared availability

160Value of shared availability

The value of shared availability is calculated under—

(a)section 161, or

(b)section 164 where the employee makes a claim for that section to apply.

161Value of shared availability: normal calculation

(1)The value of shared availability is calculated as follows—

  • Step 1

    Identify the van or vans involved in the calculation. They are—

    (a)

    the shared van, and

    (b)

    where that van is made available by the employer, any other vans made available (whether or not to the employee or a member of the employee’s family or household) by the same employer which are shared vans for the whole or any part of the tax year in question.

  • Step 2

    Determine whether the employee is a participating employee within the meaning of section 162.

    If the employee is not, then the value of shared availability is nil.

  • Step 3

    Determine the total number of participating employees within the meaning of section 162.

  • Step 4

    Find the basic value of the van for the year under section 163 or, where more than one van is involved, the basic value of each of those vans for the year under that section.

  • Step 5

    Calculate the reckonable amount which is given by the formula—

    Formula - BV divided by PE

    where—

    • BV is the basic value of the van or, where more than one van is involved, the total of the basic values of each of those vans, and

    • PE is the total number of participating employees.

  • Step 6

    If the reckonable amount exceeds £500, the provisional sum is £500.

    In any other case, the provisional sum is the reckonable amount.

  • Step 7

    Make any deduction from the provisional sum under section 165 in respect of payments by the employee for the private use of the van or vans involved.

The result is the value of shared availability.

(2)The calculation is made under this section in relation to a participating employee regardless of—

(a)the number of vans involved which are available to the particular employee,

(b)the fact that a particular van involved is or is not available to, or used by, the employee, or

(c)the extent to which a particular van involved is available to, or used by, the employee.

162Shared van: meaning of “participating employee”

(1)If only one van is involved, an employee is a participating employee for the purposes of section 161 if—

(a)the van is available to the employee for the employee’s private use while it is a shared van, and

(b)the employee makes private use of it at least once while it is a shared van.

(2)If more than one van is involved, an employee is a participating employee for the purposes of section 161 if—

(a)one of the vans is available to the employee for the employee’s private use while it is a shared van, or

(b)some or all of the vans are available to the employee for the employee’s private use while they are shared vans,

and the employee makes private use of at least one of the vans involved while it is a shared van.

(3)In this section—

(a)any reference to a van being available for an employee’s private use includes a reference to the van being available for the private use of a member of the employee’s family or household, and

(b)any reference to an employee making private use of a van includes a reference to a member of the employee’s family or household making private use of it.

163Shared van: basic value

(1)The basic value of a shared van is calculated as follows—

  • Step 1

    Determine the age of the van.

  • Step 2

    If the age of the van is less than 4 years at the end of the tax year in question, the interim value of the van is £500.

    In any other case, the interim value of the van is £350.

  • Step 3

    Make a deduction from the interim value if there are any excluded days during the tax year in question.

    The amount of the deduction is given by the formula—

    Formula - (E divided by Y) multiplied by IV

    where—

    • E is the number of excluded days in the year,

    • Y is the number of days in the year, and

    • IV is the interim value of the van.

    • The result is the basic value of the van for the year.

(2)In this section an “excluded day” means a day on which—

(a)the van is not a shared van, or

(b)the van is incapable of use.

(3)For the purposes of this section a van is to be treated as incapable of use on any day if the day falls within a period of 30 days or more throughout which the van is incapable of being used at all.

164Value of shared availability: alternative calculation

(1)This section applies if the employee makes a claim for this section to apply instead of section 161.

(2)The value of shared availability is calculated as follows—

  • Step 1

    Identify the van or vans involved in the calculation. They are—

    (a)

    the shared van, and

    (b)

    where that van is made available by the employer, any other vans made available by the same employer to the employee or a member of the employee’s family or household which are shared vans for the whole or any part of the tax year in question.

  • Step 2

    Determine the number of relevant days for the van, or where more than one van is involved, for each of those vans.

  • Step 3

    Calculate the provisional sum which is given by the formula—

    RD × £5

    where RD is the number of relevant days for the van or, where more than one van is involved, the total of the number of relevant days for each of those vans.

  • Step 4

    Make any deduction from the provisional sum under section 165 in respect of payments by the employee for the private use of the van or vans involved.

The result is the value of shared availability.

(3)For the purposes of this section a relevant day is a day—

(a)which falls in the tax year in question, and

(b)during which (or during part of which) the employee or a member of the employee’s family or household makes private use of the van concerned while it is a shared van.

(4)For the purposes of section 95 of TMA 1970 (incorrect return etc.) a claim under this section is to be treated as a claim for relief.

165Deduction for payments for private use

(1)A deduction is to be made from the provisional sum calculated under step 6 of section 161(1) or step 3 of section 164(2) if, as a condition of the van or vans involved being available for the employee’s private use, the employee—

(a)is required in the tax year in question to pay (whether by way of deduction from earnings or otherwise) an amount of money for that use, and

(b)makes such payment.

(2)If the relevant sum in respect of that year is equal to or exceeds the provisional sum, the provisional sum is reduced so that the value of shared availability is nil.

(3)In any other case the relevant sum in respect of the year is deducted from the provisional sum in order to give the value of shared availability.

(4)The relevant sum is found by—

(a)taking for any van involved the amount paid by the employee as a condition of it being available for the employee’s private use in respect of the period when it is a shared van in the year concerned, and

(b)where more than one van is involved, adding together all the amounts found under paragraph (a).

(5)In this section any reference to a van being available for the employee’s private use includes a reference to the van being available for the private use of a member of the employee’s family or household.

Vans: limit of cash equivalent

166Vans: limit of cash equivalent

If—

(a)the cash equivalent of the benefit of vans to an employee for a tax year would (apart from this section) total more than £500, and

(b)no more than one of the vans is available to the employee for the employee’s private use, or the private use of a member of the employee’s family or household, at any one time in the year,

the cash equivalent of the benefit of the vans to the employee for the year is to be £500.

Cars and vans: exceptions

167Pooled cars

(1)This section applies to a car in relation to a particular tax year if for that year the car has been included in a car pool for the use of the employees of one or more employers.

(2)For that tax year the car—

(a)is to be treated under section 114(1) (cars to which this Chapter applies) as not having been available for the private use of any of the employees concerned, and

(b)is not to be treated in relation to the employees concerned as an employment-related benefit within the meaning of Chapter 10 of this Part (taxable benefits: residual liability to charge) (see section 201).

(3)In relation to a particular tax year, a car is included in a car pool for the use of the employees of one or more employers if in that year—

(a)the car was made available to, and actually used by, more than one of those employees,

(b)the car was made available, in the case of each of those employees, by reason of the employee’s employment,

(c)the car was not ordinarily used by one of those employees to the exclusion of the others,

(d)in the case of each of those employees, any private use of the car made by the employee was merely incidental to the employee’s other use of the car in that year, and

(e)the car was not normally kept overnight on or in the vicinity of any residential premises where any of the employees was residing, except while being kept overnight on premises occupied by the person making the car available to them.

168Pooled vans

(1)This section applies to a van in relation to a particular tax year if for that year the van has been included in a van pool for the use of the employees of one or more employers.

(2)For that tax year the van—

(a)is to be treated under section 114(1) (vans to which this Chapter applies) as not having been available for the private use of any of the employees concerned, and

(b)is not to be treated in relation to the employees concerned as an employment-related benefit within the meaning of Chapter 10 of this Part (taxable benefits: residual liability to charge) (see section 201).

(3)In relation to a particular tax year, a van is included in a van pool for the use of the employees of one or more employers if in that year—

(a)the van was made available to, and actually used by, more than one of those employees,

(b)the van was made available, in the case of each of those employees, by reason of the employee’s employment,

(c)the van was not ordinarily used by one of those employees to the exclusion of the others,

(d)in the case of each of those employees, any private use of the van made by the employee was merely incidental to the employee’s other use of the van in that year, and

(e)the van was not normally kept overnight on or in the vicinity of any residential premises where any of the employees was residing, except while being kept overnight on premises occupied by the person making the van available to them.

169Car available to more than one member of family or household employed by same employer

(1)This section applies where—

(a)an employee (“E”) and a member of the employee’s family or household (“M”) are employed by the same employer, and

(b)as a result of a car being made available to M in a tax year, E would (apart from this section) be chargeable to tax in respect of the car in that year by virtue of section 120.

(2)The cash equivalent of the benefit of the car and of any fuel provided for the car by reason of E’s employment is not to be treated as E’s earnings for that year if—

(a)M is chargeable to tax in respect of the car in that year by virtue of section 120, or

(b)where M’s employment is an excluded employment, M had the benefit of the car in M’s own right as an employee and condition A or B is met.

(3)Condition A is met if equivalent cars are made available on the same terms to employees who—

(a)are in similar employment to M with the same employer, and

(b)are not members of the family or household of employees of that employer who are employed in employment which is not an excluded employment.

(4)Condition B is met if the making available of an equivalent car is in accordance with the normal commercial practice for an employment of the kind held by M.

Orders

170Orders etc. relating to this Chapter

(1)The Treasury may by order substitute a greater amount for that for the time being specified in—

(a)step 4 of section 121(1) (car: maximum interim sum),

(b)section 126(3)(d) (car: minimum price of later accessory),

(c)section 132(3)(b) (car: maximum contributions deduction),

(d)section 147(1)(b) (classic car: minimum value), or

(e)section 147(7)(b) (classic car: maximum contributions deduction).

(2)An order under subsection (1) must specify the tax years to which it applies.

(3)The Treasury may by order provide for a “lower threshold” different from that specified in the Table in section 139(4) (car with a CO2 emissions figure) to apply for tax years beginning on or after 6th April 2005 or such later date as may be specified in the order.

(4)The Treasury may by regulations provide for the value of the appropriate percentage as determined under sections 139 to 141 to be reduced—

(a)by such amount,

(b)in such circumstances, and

(c)subject to such conditions,

as may be prescribed in the regulations.

(5)The Treasury may by order substitute a different amount for that specified in section 150(1) (car fuel: cash equivalent).

(6)An order under subsection (5) must specify the tax years to which it applies, being tax years beginning after that in which it is made.

Supplementary

171Minor definitions: general

(1)In this Chapter—

  • “business travel”, in relation to any employee, means travelling the expenses of which, if incurred and paid by the employee, would (if Chapter 2 of Part 4 did not apply) be deductible under sections 337 to 342, section 353 or under Chapter 5 of Part 5 (other than section 377);

  • “diesel” means any diesel fuel within the definition in Article 2 of Directive 98/70/EC of the European Parliament and of the Council;

  • “EC certificate of conformity” means a certificate of conformity issued by a manufacturer under any provision of the law of a Member State implementing Article 6 of Council Directive 70/156/EEC, as amended;

  • “EC type-approval certificate” means a type-approval certificate issued under any provision of the law of a Member State implementing Council Directive 70/156/EEC, as amended;

  • “relevant taxes” means any car tax, any value added tax, any customs or excise duty and any tax chargeable as if it were a customs duty;

  • “road fuel gas” means any substance which is gaseous at a temperature of 15°C and under a pressure of 1013.25 millibars, and which is for use as fuel in road vehicles;

  • “UK approval certificate” means a certificate issued under—

    (a)

    section 58(1) or (4) of the Road Traffic Act 1988 (c. 52), or

    (b)

    Article 31A(4) or (5) of the Road Traffic (Northern Ireland) Order 1981 (S.I. 1981/154 (N.I. 1)).

(2)In this Chapter references to the date of first registration in relation to a car or van are to the date on which the vehicle was first registered under VERA 1994 or under corresponding legislation of any country or territory.

(3)In this Chapter references to the age of a car or a van at any time are to the interval between the date of first registration of the vehicle and that time.

(4)In this Chapter “disabled person’s badge” means a badge—

(a)which is issued to a disabled person under section 21 of the Chronically Sick and Disabled Persons Act 1970 (c. 44) or section 14 of the Chronically Sick and Disabled Persons (Northern Ireland) Act 1978 (c. 53), or has effect as if it had been issued under one of those provisions, and

(b)which is not required to be returned to the issuing authority under or by virtue of the provision referred to in paragraph (a).

172Minor definitions: equipment to enable a disabled person to use a car

(1)In section 125(2)(c) “equipment to enable a disabled person to use a car” means equipment—

(a)which is designed solely for use by a chronically sick or disabled person, or

(b)which is made available for use with the car because it enables a disabled employee to use the car in spite of the disability.

(2)In this section—

  • “disabled employee” means an employee who, at the time when the car is first made available to the employee, holds a disabled person’s badge, and

  • “the disability” means the disability entitling the disabled employee to hold the disabled person’s badge.

Chapter 7Taxable benefits: loans

Introduction

173Loans to which this Chapter applies

(1)This Chapter applies to a loan if it is an employment-related loan.

(2)In this Chapter—

(a)“loan” includes any form of credit, and

(b)references to making a loan (and related expressions) include arranging, guaranteeing or in any way facilitating a loan.

(3)Sections 288 and 289 make provision for exemption and relief for certain bridging loans connected with employment moves.

174Employment-related loans

(1)For the purposes of this Chapter an employment-related loan is a loan—

(a)made to an employee or a relative of an employee, and

(b)of a class described in subsection (2).

(2)For the purposes of this Chapter the classes of employment-related loan are—

  • A

    A loan made by the employee’s employer.

  • B

    A loan made by a company or partnership over which the employee’s employer had control.

  • C

    A loan made by a company or partnership by which the employer (being a company or partnership) was controlled.

  • D

    A loan made by a company or partnership which was controlled by a person by whom the employer (being a company or partnership) was controlled.

  • E

    A loan made by a person having a material interest in—

    (a)

    a close company which was the employer, had control over the employer or was controlled by the employer, or

    (b)

    a company or partnership controlling that close company.

(3)In this section—

  • “employee” includes a prospective employee, and

  • “employer” includes a prospective employer.

(4)References in this section to a loan being made by a person extend to a person who—

(a)assumes the rights and liabilities of the person who originally made the loan, or

(b)arranges, guarantees or in any way facilitates the continuation of a loan already in existence.

(5)A loan is not an employment-related loan if—

(a)it is made by an individual in the normal course of the individual’s domestic, family or personal relationships, or

(b)it is made to a relative of the employee and the employee derives no benefit from it.

(6)For the purposes of this section a person (“X”) is a relative of another (“Y”) if X is—

(a)Y’s spouse,

(b)a parent, child or remoter relation in the direct line either of Y or of Y’s spouse,

(c)a brother or sister of Y or of Y’s spouse, or

(d)the spouse of a person falling within paragraph (b) or (c).

Benefit of taxable cheap loan treated as earnings

175Benefit of taxable cheap loan treated as earnings

(1)The cash equivalent of the benefit of an employment-related loan is to be treated as earnings from the employee’s employment for a tax year if the loan is a taxable cheap loan in relation to that year.

(2)For the purposes of this Chapter an employment-related loan is a “taxable cheap loan” in relation to a particular tax year if—

(a)there is a period consisting of the whole or part of that year during which the loan is outstanding and the employee holds the employment,

(b)no interest is paid on it for that year, or the amount of interest paid on it for that year is less than the interest that would have been payable at the official rate, and

(c)none of the exceptions in sections 176 to 179 apply.

(3)The cash equivalent of the benefit of an employment-related loan for a tax year is the difference between—

(a)the amount of interest that would have been payable on the loan for that year at the official rate, and

(b)the amount of interest (if any) actually paid on the loan for that year.

(4)If there are two or more employment-related loans, this section applies to each separately.

(5)This section is subject to—

  • section 180 (threshold for benefit of loan to be treated as earnings);

  • section 186 (replacement loans).

176Exception for loans on ordinary commercial terms

(1)A loan on ordinary commercial terms is not a taxable cheap loan.

(2)In this section a “loan on ordinary commercial terms” means a loan—

(a)made by a person (“the lender”) in the ordinary course of a business carried on by the lender which includes—

(i)the lending of money, or

(ii)the supplying of goods or services on credit, and

(b)in relation to which condition A, B or C is met.

(3)Condition A is met if—

(a)at the time the loan was made comparable loans were available to all those who might be expected to avail themselves of the services provided by the lender in the course of the lender’s business,

(b)a substantial proportion of the loans (consisting of the loan in question and the comparable loans) made by the lender at or about the time the loan in question was made were made to members of the public,

(c)the loan in question is held on the same terms as comparable loans generally made by the lender to members of the public at or about the time the loan in question was made, and

(d)where those terms differ from the terms applicable immediately after the loan in question was first made, they were imposed in the ordinary course of the lender’s business.

(4)For the purposes of condition A a loan is comparable to another loan if it is made for the same or similar purposes and on the same terms and conditions.

(5)Condition B is met if—

(a)the loan has been varied before 6th April 2000,

(b)a substantial proportion of the relevant loans were made to members of the public,

(c)the loan in question is held on the same terms as relevant loans generally made by the lender to members of the public at or about the relevant time, and

(d)where those terms differ from the terms applicable immediately after the relevant time, they were imposed in the ordinary course of the lender’s business.

(6)Condition C is met if—

(a)the loan has been varied on or after 6th April 2000,

(b)a substantial proportion of the relevant loans were made to members of the public,

(c)at the relevant time members of the public who had loans from the lender for similar purposes had a right to vary their loans on the same terms and conditions as applied in relation to the variation of the loan in question,

(d)the loan in question as varied is held on the same terms as any existing loans so varied, and

(e)where those terms differ from the terms applicable immediately after the relevant time, they were imposed in the ordinary course of the lender’s business.

(7)For the purposes of condition B and C—

(a)the “relevant time” is the time of the variation of the loan in question, and

(b)the “relevant loans” are—

(i)the loan in question,

(ii)any existing loans which were varied at or about the relevant time so as to be held on the same terms as the loan in question after it was varied, and

(iii)any new loans which were made by the lender at or about that time and are held on those terms.

(8)No account is to be taken of amounts which are incurred on fees, commission or other incidental expenses by the person to whom a loan is made for the purpose of obtaining the loan—

(a)in determining for the purposes of condition A whether loans made by a lender before 1st June 1994 are made or held on the same terms or conditions, or

(b)in determining for the purposes of condition B or C whether rights to vary loans are exercisable on the same terms and conditions or loans are held on the same terms.

(9)No account is to be taken of amounts which are incurred on penalties, interest or similar amounts by the person to whom a loan is made as a result of varying the loan in determining for the purposes of condition B or C whether rights to vary loans are exercisable on the same terms and conditions or loans are held on the same terms.

(10)For the purposes of this section a “member of the public” means a member of the public at large with whom the lender deals at arm’s length.

177Exceptions for loans at fixed rate of interest

(1)A fixed rate loan made on or after 6th April 1978 is not a taxable cheap loan by reason only of an increase in the official rate of interest since the year in which the loan was made if the condition in subsection (2) is met.

(2)The condition in this subsection is met if the amount of interest paid on the loan for the tax year in which it was made was equal to or greater than the interest that would have been payable at the official rate for that year.

(3)A fixed rate loan made before 6th April 1978 is not a taxable cheap loan if the condition in subsection (4) is met.

(4)The condition in this subsection is met if the rate of interest for the loan is equal to or greater than the rate which could have been expected to apply to a loan made—

(a)at the same time as the loan in question,

(b)on the same terms (other than as to the rate of interest), and

(c)between persons not connected with each other dealing at arm’s length.

(5)In this section a “fixed rate loan” means a loan—

(a)made for a fixed period which cannot be changed, and

(b)made at a fixed rate of interest which cannot be changed during that period.

178Exception for loans where interest qualifies for tax relief

A loan is not a taxable cheap loan in relation to a particular tax year if, assuming interest is paid on the loan for that year (whether or not it is in fact paid), the whole of that interest—

(a)is eligible for relief under section 353 of ICTA (general provision for relief for payments of interest, excluding MIRAS),

(b)would be eligible for relief under that section but for the fact that it is a payment of relevant loan interest to which section 369 of ICTA applies (mortgage interest payable under deduction of tax),

(c)is deductible in computing the amount of the profits to be charged under Case I or II of Schedule D in respect of a trade, profession or vocation carried on by the person to whom the loan is made, or

(d)is deductible in computing the amount of the profits to be charged under Schedule A in respect of a Schedule A business carried on by that person.

179Exception for certain advances for necessary expenses

(1)An advance by an employer to an employee for the purpose of paying for—

(a)necessary expenses, or

(b)incidental overnight expenses,

is not a taxable cheap loan in relation to a particular tax year if the following conditions are met.

(2)The conditions are—

(a)that at all times in the tax year in question the amount outstanding on such advances made by the employer to the employee does not exceed £1,000,

(b)that the advance is spent within 6 months after the date on which it is made, and

(c)that the employee accounts to the employer at regular intervals for the expenditure of the amount advanced.

(3)If, on an application made by the employer, the Inland Revenue are satisfied that there is good reason to do so in the case of a particular advance, they may authorise that either or both of the following limits are increased in relation to that advance—

(a)the sum of money specified in subsection (2)(a);

(b)the time limit specified in subsection (2)(b).

(4)An application under subsection (3)—

(a)must be in writing, and

(b)must contain such particulars and be supported by such evidence as the Inland Revenue may require.

(5)In this section “necessary expenses” are expenses (including travel expenses) which—

(a)the employee is obliged to incur and pay as holder of the employment, and

(b)are necessarily incurred in the performance of the duties of the employment.

(6)In this section “incidental overnight expenses” are expenses which—

(a)are incidental to the employee’s absence from the place where the employee normally lives,

(b)relate to a continuous period of such absence in relation to which the overnight stay conditions are met, and

(c)would not be deductible under Part 5 if the employee incurred and paid them and Chapter 2 of Part 4 (mileage allowances and passenger payments) did not apply.

(7)In subsection (6)(b) “the overnight stay conditions” has the same meaning as in section 240 (exemption for incidental overnight expenses) (see section 240(4)).

180Threshold for benefit of loan to be treated as earnings

(1)The cash equivalent of the benefit of an employment-related loan is not to be treated as earnings of the employment for a tax year under section 175(1)—

(a)if the normal £5,000 threshold is not exceeded, or

(b)where the loan is a non-qualifying loan and that threshold is exceeded, if the £5,000 threshold for non-qualifying loans is not exceeded.

(2)The normal £5,000 threshold is not exceeded if at all times in the year the amount outstanding on the loan (or, if two or more employment-related loans which are taxable cheap loans are outstanding in the year, the aggregate of the amount outstanding on them) does not exceed £5,000.

(3)The £5,000 threshold for non-qualifying loans is not exceeded if at all times in the year the amount outstanding on the loan (or if two or more employment-related loans which are non-qualifying loans are outstanding in the year, the aggregate of the amounts outstanding on them) does not exceed £5,000.

(4)In this section a “non-qualifying loan” means a taxable cheap loan which is not a qualifying loan.

(5)For the purposes of this section a loan is a “qualifying loan” in relation to a particular tax year if, assuming interest is paid on the loan for that year (whether or not it is in fact paid), the whole or part of that interest—

(a)is eligible for relief under section 353 of ICTA (general provision for relief for payments of interest, excluding MIRAS),

(b)would be eligible for relief under that section but for the fact that it is a payment of relevant loan interest to which section 369 of ICTA applies (mortgage interest payable under deduction of tax),

(c)is deductible in computing the amount of the profits to be charged under Case I or II of Schedule D in respect of a trade, profession or vocation carried on by the person to whom the loan is made, or

(d)is deductible in computing the amount of the profits to be charged under Schedule A in respect of a Schedule A business carried on by that person.

Calculation of amount of interest at official rate

181The official rate of interest

(1)“The official rate of interest” for the purposes of this Chapter means the rate applicable under section 178 of FA 1989 (general power of Treasury to specify rates of interest).

(2)Regulations under that section may make different provision in relation to a loan if—

(a)it was made in the currency of a country or territory outside the United Kingdom, and

(b)the employee normally lives in that country or territory, and has actually lived there at some time in the period of 6 years ending with the tax year in question.

(3)Subsection (2) does not affect the general power under section 178(3) of FA 1989 to make different provision for different purposes.

182Normal method of calculation: averaging

The normal method of calculating for the purposes of this Chapter the amount of interest that would be payable on a loan for a tax year at the official rate is as follows.

  • Step 1

    Calculate the average amount of the loan outstanding during the tax year—

    1.

    Find the maximum amount of the loan outstanding on 5th April preceding the tax year or, if the loan was made in the tax year, on the date it was made.

    2.

    Find the maximum amount outstanding on 5th April of the tax year or, if the loan was discharged in the tax year, on the date of discharge.

    3.

    Add these amounts together and divide the result by 2.

  • Step 2

    If the official rate of interest changed during the period in the tax year when the loan was outstanding, calculate the average official rate of interest for that period as follows—

    1.

    Multiply each official rate of interest in force during the period by the number of days when it is in force.

    2.

    Add these products together.

    3.

    Divide the result by the number of days in the period.

  • Step 3

    Calculate the amount of interest that would be payable on the loan for the tax year at the official rate as follows—

    Formula - A multiplied by I multiplied by (M divided by 12)

    where—

    • A is the average amount of the loan outstanding during the tax year obtained from step 1,

    • I is the official rate of interest in force during the period in the tax year when the loan was outstanding or, if the official rate changed, the average official rate of interest obtained from step 2, and

    • M is the number of whole months during which the loan was outstanding in the year.

    For this purpose a month begins on the sixth day of the calendar month.

183Alternative method of calculation

(1)The alternative method of calculating for the purposes of this Chapter the amount of interest that would be payable on a loan for a tax year at the official rate applies for a tax year—

(a)if the Inland Revenue so require, by notice to the employee, or

(b)if the employee so elects, by notice to the Inland Revenue.

(2)Notice may be given on or before the first anniversary of the normal self-assessment filing date for the tax year in relation to which the question arises whether the loan is a taxable cheap loan.

(3)The alternative method is as follows—

  • Step 1

    Find for each day in the tax year in question the maximum amount of the loan outstanding on that day and multiply it by the official rate of interest in force on that day.

  • Step 2

    Add together each of the amounts obtained under step 1.

  • Step 3

    Divide the result by the number of days in the tax year.

(4)Where in any tax year the cash equivalent of the benefit of the same taxable cheap loan is to be treated as earnings of two or more employees then, for the purposes of determining the cash equivalent of the benefit of the loan, the alternative method applies if—

(a)the notice under subsection (1)(a) is given to all those employees, or

(b)the notice under subsection (1)(b) is given by all those employees.

Supplementary provisions relating to taxable cheap loans

184Interest treated as paid

(1)This section applies where the cash equivalent of the benefit of a taxable cheap loan is treated as earnings from an employee’s employment for a tax year under section 175(1).

(2)The employee is to be treated for the purposes of the Tax Acts as having paid interest on the loan in that year equal to the cash equivalent.

(3)But the employee is not to be treated as having paid that interest for the purposes of this Chapter or of any of the other Chapters of this Part listed in section 216(4) (provisions of the benefits code which do not apply to lower-paid employment).

(4)The interest is to be treated—

(a)as accruing during the period in the tax year during which the employee holds the employment and the loan is outstanding, and

(b)as paid by the employee at the end of the period.

(5)The interest is not to be treated—

(a)as income of the person making the loan, or

(b)as relevant loan interest to which section 369 of ICTA applies (mortgage interest payable under deduction of tax).

185Apportionment of cash equivalent in case of joint loan etc.

Where in any tax year the cash equivalent of the benefit of the same taxable cheap loan is to be treated as earnings of two or more employees—

(a)the cash equivalent of the benefit of the loan (determined in accordance with the provisions of this Chapter) is to be apportioned between them in a just and reasonable manner, and

(b)the portion allocated to each employee is to be treated as the cash equivalent of the benefit of the loan so far as that employee is concerned.

186Replacement loans

(1)This section applies where an employment-related loan (“the original loan”) is replaced, directly or indirectly, by—

(a)a further employment-related loan, or

(b)a loan which is not an employment-related loan but which in turn is, in the same tax year or within 40 days after the end of the tax year, replaced, directly or indirectly, by a further employment-related loan.

(2)In such a case, for the purposes of calculating the cash equivalent of the benefit of the original loan under section 175(3), section 182 (normal method of calculating interest at the official rate) applies as if the replacement loan, or each of the replacement loans, were the same loan as the original loan.

(3)Where section 182 is applied as modified by subsection (2) then for the purposes of section 175(3)(b) the amount of interest actually paid on the loan for the tax year in question is the total of—

(a)the amount of interest actually paid on the original loan for that year, and

(b)the amount of interest actually paid on the replacement loan or on each of the replacement loans for that year.

(4)In this section a “further employment-related loan” means a loan which is an employment-related loan made in relation to—

(a)the same or other employment with the person who is the employer in relation to the original loan, or

(b)employment with a person who is connected with that employer.

187Aggregation of loans by close company to director

(1)This section applies where, in relation to any tax year, there are employment-related loans between the same lender and borrower which are aggregable with each other.

(2)The lender may elect for aggregation to apply for that tax year in the case of the borrower.

(3)The effect of the election is that all the aggregable loans are to be treated as a single loan for the purposes of—

  • section 175 (benefit of taxable cheap loan treated as earnings),

  • the provisions of this Chapter relating to the calculation of the cash equivalent of the benefit of a taxable cheap loan, and

  • section 184 (interest treated as paid).

(4)For this purpose loans are aggregable for any tax year if they are made in the same currency and all the following conditions are met in relation to each of them—

(a)there is a time in the tax year when—

(i)the loan is outstanding,

(ii)the lender is a close company, and

(iii)the borrower is a director of that company;

(b)at all times in the tax year the rate of interest on the loan is less than the official rate applying at that time;

(c)the loan is not a qualifying loan within the meaning of section 180 (see section 180(5)).

(5)An election under this section must be made by the lender in a notice given—

(a)to the Inland Revenue, and

(b)before 7th July after the end of the tax year to which the election relates.

Loan released or written off

188Loan released or written off: amount treated as earnings

(1)If—

(a)the whole or part of an employment-related loan is released or written off in a tax year, and

(b)at the time when it is released or written off the employee holds the employment in relation to which the loan is an employment-related loan (“employment E”),

the amount released or written off is to be treated as earnings from the employment for that year.

(2)But if the employment has terminated or become an excluded employment and there was a time when—

(a)the whole or part of the loan was outstanding,

(b)the employee held the employment, and

(c)it was not an excluded employment,

subsection (1) applies as if the employment had not terminated or become an excluded employment.

(3)Where subsection (2) applies, any loan which replaces directly or indirectly the employment-related loan is to be treated as an employment-related loan in relation to employment E if—

(a)it would, if employment E had not terminated or become excluded employment, have been an employment-related loan in relation to employment E, and

(b)it is not an employment-related loan in relation to other employment.

(4)This section is subject to section 189 (exception where double charge).

189Exception where double charge

(1)Section 188 (loan released or written off: amount treated as earnings) does not apply if, by virtue of any other provision of the Income Tax Acts, the amount released or written off—

(a)is employment income of the employee, or

(b)is or is treated as income of the employee (or of the employee as a borrower) which is not employment income and upon which that person is liable to pay income tax.

This is subject to subsections (2) and (3).

(2)If, as a result of subsection (1), Chapter 3 of Part 6 (payments and benefits on termination of employment etc.) would be the only provision by virtue of which the amount released or written off would be income of the employee—

(a)section 188 does apply, and

(b)accordingly Chapter 3 of Part 6 does not apply.

(3)If—

(a)an amount is treated as the employee’s income under section 677 of ICTA (sums paid to settlor otherwise than as income) in respect of a capital sum paid in relation to the release or writing-off of the loan, and

(b)the amount released or written off exceeds the amount so treated as income,

section 188 does apply but only the amount of the excess is to be treated as earnings from the employment for the tax year in question under that section.

General supplementary provisions

190Exclusion of charge after death of employee

(1)On the employee’s death a taxable cheap loan is to be treated—

(a)for the purposes of this Chapter as ceasing to be outstanding, and

(b)for the purposes of section 182 (normal method of calculating interest at the official rate) as being discharged on the date of death.

(2)Section 188 (loan released or written off: amount treated as earnings) does not apply in relation to a release or writing off which takes effect on or after the death of the employee.

191Claim for relief to take account of event after assessment

(1)A claim may be made for relief in the following cases.

(2)The first case is where—

(a)the tax payable by an employee for a tax year in respect of a loan has been decided on the basis that, for the purposes of section 175 (benefit of taxable cheap loan treated as earnings), the whole or part of the interest payable on the loan for that year was not paid, and

(b)it is subsequently paid.

(3)The second case is where—

(a)the tax payable by an employee for a tax year in respect of a loan has been decided on that basis that, for the purposes of section 188 (loan released or written off: amount treated as earnings), the loan has been released or written off in that year, and

(b)the whole or part of the loan is subsequently repaid.

(4)The third case is where—

(a)the tax payable by an employee for a tax year in respect of a loan has been decided on the basis that—

(i)section 288 (limited exemption of certain bridging loans connected with employment moves), and

(ii)section 289 (relief for certain bridging loans not qualifying for exemption under section 288),

will not apply because the condition in section 288(1)(b) (which requires that the limit on the exemption under section 287(1) has not been reached) will not be met, and

(b)that condition is met.

(5)Where a claim is made under this section the tax payable is to be adjusted accordingly.

Chapter 8Taxable benefits: notional loans in respect of acquisitions of shares

Introduction

192Application of this Chapter

(1)This Chapter applies where—

(a)shares in a company are, or an interest in shares in a company is, acquired by an employee or a person connected with an employee, and

(b)the right or opportunity to acquire the shares or interest in shares was available by reason of the employment.

(2)The shares may be in the employer, or in another company.

(3)A right or opportunity to acquire shares or an interest in shares which is made available by the employer is to be regarded as made available by reason of the employment unless—

(a)the employer is an individual, and

(b)the right or opportunity is made available in the normal course of the employer’s domestic, family or personal relationships.

(4)In this Chapter—

  • “the acquisition” means the acquisition of shares or an interest in shares mentioned in subsection (1), and

  • “the employment-related shares” means the shares or interest in shares acquired.

Acquisition of shares for less than market value

193Notional loan where acquisition for less than market value

(1)This section applies if—

(a)no payment is made for the employment-related shares at or before the time of the acquisition, or

(b)the payment made at or before that time is less than—

(i)the market value at that time of fully paid up shares of their class, or

(ii)if the employment-related shares consist of an interest in shares, the proportion of the market value at that time of fully paid up shares of the same class as those in which the interest subsists that corresponds to the size of the interest.

(2)For the purposes of subsection (1), any obligation to make payment or further payment at some later time is to be disregarded.

(3)The provisions listed in subsection (4) apply as if a loan (“the notional loan”) had been made to the employee by the employer at the time of the acquisition which—

(a)is an employment-related loan as defined in section 174, and

(b)is interest-free.

(4)The provisions are—

  • section 175 (benefit of taxable cheap loan treated as earnings),

  • section 178 (exception for loans where interest qualifies for tax relief),

  • section 180 (threshold for benefit of loan to be treated as earnings),

  • section 182 (normal method of calculation: averaging),

  • section 183 (alternative method of calculation),

  • section 184 (interest treated as paid),

  • section 185 (apportionment of cash equivalent in case of joint loan etc.), and

  • section 187 (aggregation of loans by close company to director).

(5)This section is subject to—

  • section 491 (approved SIPs: no charge on award of shares as taxable benefit),

  • section 519 (approved SAYE option schemes: no charge in respect of exercise of option),

  • section 524 (approved CSOP schemes: no charge in respect of exercise of option),

  • section 540 (enterprise management incentives: no charge on acquisition of shares as taxable benefit),

  • section 542 (exemption: offer made to public and employees), and

  • section 544 (exemption: different offers made to public and employees).

194The amount of the notional loan

(1)The amount of the notional loan initially outstanding is—

MV - DA

where—

  • MV is—

    (a)

    the market value of fully paid up shares of the same class as the employment-related shares, or

    (b)

    if the employment-related shares consist of an interest in shares, the proportion of the market value of fully paid up shares of the same class as those in which the interest subsists that corresponds to the size of the interest, and

  • DA is the total of any deductible amounts.

(2)For the purposes of subsection (1) each of the following is a “deductible amount”—

(a)any payment made for the employment-related shares at or before the time of the acquisition;

(b)any amount that constitutes earnings from the employee’s employment under Chapter 1 of this Part (earnings) in respect of the acquisition;

(c)if the acquisition results from the exercise of a share option—

(i)any amount that constitutes earnings from the employment under Chapter 1 of this Part (earnings) in respect of the receipt of the share option,

(ii)any amount that is treated as earnings from the employment under Chapter 10 of this Part (taxable benefits: residual liability to charge) in respect of its receipt, and

(iii)any amount that counts as employment income of the employee under section 476 or 477 (charge on employee on exercise etc. of option by employee or another person) in respect of the exercise; and

(d)if the acquisition results from the exercise of a share option and an amount counts as employment income of the employee under section 526 (approved CSOP schemes: charge where option granted at a discount) in respect of the share option, so much of that amount as is attributable to the employment-related shares.

(3)The amount of the notional loan outstanding at any subsequent time is the difference between—

(a)the amount initially outstanding, and

(b)the amount of any payments or further payments made for the employment-related shares after the acquisition but before that time.

195Discharge of notional loan: amount treated as earnings

(1)The notional loan is to be treated as discharged when the following occurs—

(a)payments or further payments for the employment-related shares equal to the amount initially outstanding have been made,

(b)if the employment-related shares were not fully paid up at the time of the acquisition, any outstanding or contingent obligation to pay for them ceases to bind the employee or any person connected with the employee,

(c)the employment-related shares are disposed of so that neither the employee nor any person connected with the employee any longer has a beneficial interest in them, or

(d)the employee dies.

(2)If—

(a)a notional loan is discharged as a result of an event specified in subsection (1)(b) or (c), and

(b)at the time of that event the employee holds the employment by reason of which the right or opportunity to make the acquisition was available,

the amount of the notional loan outstanding immediately before the occurrence of the event is to be treated as earnings from the employment for the tax year in which the event occurs.

(3)But if the employment has terminated or become an excluded employment before that event and there was a time when—

(a)the whole or part of the notional loan was outstanding,

(b)the employee held the employment, and

(c)it was not an excluded employment,

subsection (2) applies as if the employment had not terminated or become an excluded employment.

Supplementary provisions

196Effects on other income tax charges

Nothing in this Chapter affects any liability to income tax arising in respect of the acquisition by virtue of—

(a)Chapter 1 of this Part (earnings), or

(b)section 476 or 477 (charge on employee on exercise etc. of option by employee or another person).

197Minor definitions

(1)In this Chapter—

  • “employee” includes a prospective employee;

  • “interest in shares” means an interest in shares less than full beneficial ownership and includes an interest in the proceeds of sale of part of the shares, but not a right to acquire shares;

  • “market value” has the same meaning as it has for the purposes of TCGA 1992 by virtue of Part 8 of that Act;

  • “shares” includes—

    (a)

    stock, and

    (b)

    any securities as defined in section 254(1) of ICTA.

(2)In this Chapter references to the acquisition of shares or an interest in shares include receipt by way of allotment or assignment or in any other way.

(3)In this Chapter references to payment for the employment-related shares include giving any consideration in money or money’s worth or making any subscription, whether in pursuance of a legal liability or not.

(4)In this Chapter—

  • “the acquisition”, and

  • “the employment-related shares”,

have the meaning indicated in section 192(4).

Chapter 9Taxable benefits: disposals of shares for more than market value

198Shares to which this Chapter applies

(1)This Chapter applies to shares in a company which have, or an interest in shares in a company which has, been acquired by an employee or a person connected with an employee, if the right or opportunity to acquire the shares or interest in shares was available by reason of the employment.

(2)In this Chapter, “employment-related shares” means shares, or an interest in shares, acquired as mentioned in subsection (1).

(3)The shares may be in the employer, or in another company.

(4)A right or opportunity to acquire shares or an interest in shares which is made available by the employer is to be regarded as made available by reason of the employment unless—

(a)the employer is an individual, and

(b)the right or opportunity is made available in the normal course of the employer’s domestic, family or personal relationships.

199Disposal for more than market value: amount treated as earnings

(1)This section applies if—

(a)employment-related shares are disposed of so that neither the employee nor any person connected with the employee any longer has a beneficial interest in them, and

(b)the disposal is for a consideration which exceeds the market value of the employment-related shares at the time of the disposal.

(2)But this section does not apply if the disposal occurs after the death of the employee.

(3)The amount given by the following formula is to be treated as earnings from the employee’s employment for the tax year in which the disposal occurs—

CD - MV

where—

  • CD is the amount or value of the consideration for the disposal, and

  • MV is the market value of the employment-related shares at the time of the disposal.

(4)But if—

(a)the employment has terminated or become an excluded employment before the disposal, and

(b)at the time of the acquisition of the employment-related shares the employee held, or was about to hold, the employment and it was not an excluded employment,

this section applies as if the employment had not terminated or become an excluded employment.

(5)If the employment-related shares consist of an interest in shares, the references in this section to the market value of the employment-related shares are to the proportion corresponding to the size of the interest of the market value of the shares in which the interest subsists.

200Minor definitions

(1)In this Chapter—

  • “employee” includes a prospective employee;

  • “interest in shares” means an interest in shares less than full beneficial ownership and includes an interest in the proceeds of sale of part of the shares, but not a right to acquire shares;

  • “market value” has the same meaning as it has for the purposes of TCGA 1992 by virtue of Part 8 of that Act;

  • “shares” includes—

    (a)

    stock, and

    (b)

    any securities as defined in section 254(1) of ICTA.

(2)In this Chapter references to the acquisition of shares or an interest in shares include receipt by way of allotment or assignment or in any other way.

(3)In this Chapter “employment-related shares” has the meaning indicated in section 198(2).

Chapter 10Taxable benefits: residual liability to charge

Introduction

201Employment-related benefits

(1)This Chapter applies to employment-related benefits.

(2)In this Chapter—

  • “benefit” means a benefit or facility of any kind;

  • “employment-related benefit” means a benefit, other than an excluded benefit, which is provided in a tax year—

    (a)

    for an employee, or

    (b)

    for a member of an employee’s family or household,

    by reason of the employment.

    For the definition of “excluded benefit” see section 202.

(3)A benefit provided by an employer is to be regarded as provided by reason of the employment unless—

(a)the employer is an individual, and

(b)the provision is made in the normal course of the employer’s domestic, family or personal relationships.

(4)For the purposes of this Chapter it does not matter whether the employment is held at the time when the benefit is provided so long as it is held at some point in the tax year in which the benefit is provided.

(5)References in this Chapter to an employee accordingly include a prospective or former employee.

202Excluded benefits

(1)A benefit is an “excluded benefit” for the purposes of this Chapter if—

(a)any of Chapters 3 to 9 of the benefits code applies to the benefit,

(b)any of those Chapters would apply to the benefit but for an exception, or

(c)the benefit consists in the right to receive, or the prospect of receiving, sums treated as earnings under section 221 (payments where employee absent because of sickness or disability).

(2)In this section “exception”, in relation to the application of a Chapter of the benefits code to a benefit, means any enactment in the Chapter which provides that the Chapter does not apply to the benefit.

But for this purpose section 86 (transport vouchers under pre-26th March 1982 arrangements) is not an exception.

Cash equivalent of benefit treated as earnings

203Cash equivalent of benefit treated as earnings

(1)The cash equivalent of an employment-related benefit is to be treated as earnings from the employment for the tax year in which it is provided.

(2)The cash equivalent of an employment-related benefit is the cost of the benefit less any part of that cost made good by the employee to the persons providing the benefit.

(3)The cost of an employment-related benefit is determined in accordance with section 204 unless—

(a)section 205 provides that the cost is to be determined in accordance with that section, or

(b)section 206 provides that the cost is to be determined in accordance with that section.

Determination of the cost of the benefit

204Cost of the benefit: basic rule

The cost of an employment-related benefit is the expense incurred in or in connection with provision of the benefit (including a proper proportion of any expense relating partly to provision of the benefit and partly to other matters).

205Cost of the benefit: asset made available without transfer

(1)The cost of an employment-related benefit (“the taxable benefit”) is determined in accordance with this section if—

(a)the benefit consists in—

(i)an asset being placed at the disposal of the employee, or at the disposal of a member of the employee’s family or household, for the employee’s or member’s use, or

(ii)an asset being used wholly or partly for the purposes of the employee or a member of the employee’s family or household, and

(b)there is no transfer of the property in the asset.

(2)The cost of the taxable benefit is the higher of—

(a)the annual value of the use of the asset, and

(b)the annual amount of the sums, if any, paid by those providing the benefit by way of rent or hire charge for the asset,

together with the amount of any additional expense.

(3)For the purposes of subsection (2), the annual value of the use of an asset is—

(a)in the case of land, its annual rental value;

(b)in any other case, 20% of the market value of the asset at the time when those providing the taxable benefit first applied the asset in the provision of an employment-related benefit (whether or not the person provided with that benefit is also the person provided with the taxable benefit).

If those providing the taxable benefit first applied the asset in the provision of an employment-related benefit before 6th April 1980, paragraph (b) is to be read as if the reference to 20% were a reference to 10%.

(4)In this section “additional expense” means the expense incurred in or in connection with provision of the taxable benefit (including a proper proportion of any expense relating partly to provision of the benefit and partly to other matters), other than—

(a)the expense of acquiring or producing the asset incurred by the person to whom the asset belongs, and

(b)any rent or hire charge payable for the asset by those providing the asset.

206Cost of the benefit: transfer of used or depreciated asset

(1)The cost of an employment-related benefit is determined in accordance with this section if—

(a)the benefit consists in the transfer of an asset, and

(b)the asset has been used, or has depreciated, since the person transferring the asset (“the transferor”) acquired or produced it.

(2)The cost of the benefit is the market value of the asset at the time of the transfer.

(3)But the cost of the benefit (“the current benefit”) is the higher of the market value of the asset at the time of the transfer and the amount calculated in accordance with subsection (5) if—

(a)the asset is not a car (within the meaning of Chapter 6),

(b)the asset has previously been applied in the provision of a relevant employment-related benefit (whether or not the person provided with that benefit is also the transferee), and

(c)the transferor first applied the asset in the provision of an employment-related benefit after 5th April 1980.

(4)In this section “relevant employment-related benefit” means an employment-related benefit the cost of which was to be determined in accordance with section 205.

(5)The amount referred to in subsection (3) is calculated in accordance with the following steps—

  • Step 1

    Determine the tax years in which the asset was applied in the provision of a relevant employment-related benefit (including, if appropriate, the current tax year).

  • Step 2

    Determine the cost of the benefit for each of those tax years in accordance with section 205.

  • Step 3

    Calculate the total of the amounts determined under step 2.

  • Step 4

    Calculate the market value of the asset at the time when the transferor first applied it in the provision of an employment-related benefit.

  • Step 5

    Deduct the total calculated under step 3 from the market value calculated under step 4.

    The result is the amount referred to in subsection (3).

Supplementary provisions

207Meaning of “annual rental value”

(1)For the purposes of this Chapter the “annual rental value” of land is the rent which might reasonably be expected to be obtained on a letting from year to year if—

(a)the tenant undertook to pay all taxes, rates and charges usually paid by a tenant, and

(b)the landlord undertook to bear the costs of the repairs and insurance and other expenses (if any) necessary for maintaining the land in a state to command the rent.

(2)For the purposes of subsection (1) that rent—

(a)is to be taken to be the amount that might reasonably be expected to be so obtained in respect of the letting, and

(b)is to be calculated on the basis that the only amounts that may be deducted in respect of services provided by the landlord are amounts in respect of the cost to the landlord of providing any relevant services.

(3)If the land is of a kind that might reasonably be expected to be let on terms under which—

(a)the landlord is to provide any services which are either—

(i)relevant services, or

(ii)the repair, insurance or maintenance of any premises which do not form part of the land but belong to or are occupied by the landlord, and

(b)amounts are payable in respect of the services in addition to the rent,

the rent to be established under subsection (1) in respect of the land is to be increased under subsection (4).

(4)That rent is to include—

(a)where the services are relevant services, so much of the additional amounts as exceeds the cost to the landlord of providing the services;

(b)where the services are within subsection (3)(a)(ii), the whole of the additional amounts.

(5)In this section “relevant service” means a service other than the repair, insurance or maintenance of the land or of any other land.

208Meaning of “market value”

For the purposes of this Chapter the market value of an asset at any time is the price which the asset might reasonably be expected to fetch on a sale in the open market at that time.

209Meaning of “persons providing benefit”

For the purposes of this Chapter the persons providing a benefit are the person or persons at whose cost the benefit is provided.

210Power to exempt minor benefits

(1)The Treasury may make provision by regulations for exempting from the application of this Chapter such minor benefits as may be specified in the regulations.

(2)An exemption conferred by such regulations is conditional on the benefit being made available to the employer’s employees generally on similar terms.

Special rules for scholarships

211Special rules for scholarships: introduction

(1)Sections 212 to 214 supplement the preceding provisions of this Chapter in the following ways—

  • section 212 provides for certain scholarships provided under arrangements entered into by an employer or a connected person to be regarded as provided by reason of an employment;

  • section 213 provides that this Chapter does not apply to certain scholarships provided under a trust fund or a scheme;

  • section 214 provides a different method of determining the cost of an employment-related benefit if it consists in the provision of a scholarship from a trust fund.

(2)Section 215 limits the extent to which section 331 of ICTA (exemption for scholarship income) applies to a scholarship whose provision constitutes an employment-related benefit.

(3)In this section and sections 212 to 215 “scholarship” includes a bursary, exhibition or other similar educational endowment.

212Scholarships provided under arrangements entered into by employer or connected person

(1)A scholarship which is provided for a member of an employee’s family or household is to be regarded for the purposes of this Chapter as provided by reason of the employment if it is provided under arrangements entered into by—

(a)the employer, or

(b)a person connected with the employer.

(2)Subsection (1) applies whether or not the arrangements require the employer or the connected person to contribute directly or indirectly to the cost of providing the scholarship.

(3)A scholarship is not to be regarded as provided by reason of an employment by virtue of subsection (1) if—

(a)the employer is an individual, and

(b)the arrangements are made in the normal course of the employer’s domestic, family or personal relationships.

(4)This section is without prejudice to section 201(3).

213Exception for certain scholarships under trusts or schemes

(1)This Chapter does not apply to an employment-related benefit consisting in the provision of a scholarship if conditions A, B, C and D are met.

(2)Condition A is that the scholarship would not be regarded as provided by reason of the employment if section 201(3) and section 212 were disregarded.

(3)Condition B is that the holder of the scholarship is a full-time student.

(4)Condition C is that the scholarship is provided from a trust fund or under a scheme.

(5)Condition D is that, in the tax year in which the scholarship is provided, not more than 25% of the total amount of relevant payments is attributable to scholarships provided by reason of a person’s employment.

(6)For the purposes of conditions B and D “full-time student” means a person who is in full-time education at a university, college, school or other educational establishment.

(7)For the purposes of condition D—

  • “employment” includes any employment within the meaning of the employment income Parts (see section 4), whether or not it is a taxable employment under Part 2;

  • “relevant payments” means the payments made from the fund or scheme mentioned in condition C in respect of scholarships held by full-time students.

214Scholarships: cost of the benefit

If an employment-related benefit consists in the provision of a scholarship from a trust fund—

(a)section 204 does not apply, and

(b)the cost of the benefit is the total of the payments made from the fund to the person holding the scholarship.

215Limitation of exemption for scholarship income in section 331 of ICTA

If an employment-related benefit consists in the provision of a scholarship, section 331(1) of ICTA (exemption for scholarship income) applies only in relation to the holder of the scholarship.

Chapter 11Taxable benefits: exclusion of lower-paid employments from parts of benefits code

Introduction

216Provisions not applicable to lower-paid employments

(1)The Chapters of the benefits code listed in subsection (4) do not apply to an employment in relation to a tax year if—

(a)it is lower-paid employment in relation to that year (see section 217), and

(b)condition A or B is met.

(2)Condition A is that the employee is not employed as a director of a company.

(3)Condition B is that the employee is employed as a director of a company but has no material interest in the company and either—

(a)the employment is as a full-time working director, or

(b)the company is non-profit-making or is established for charitable purposes only.

  • “Non-profit-making” means that the company does not carry on a trade and its functions do not consist wholly or mainly in the holding of investments or other property.

(4)The Chapters referred to in subsection (1) are—

  • Chapter 3 (taxable benefits: expenses payments);

  • Chapter 6 (taxable benefits: cars, vans and related benefits);

  • Chapter 7 (taxable benefits: loans);

  • Chapter 8 (taxable benefits: notional loans in respect of acquisitions of shares);

  • Chapter 9 (taxable benefits: disposals of shares for more than market value);

  • Chapter 10 (taxable benefits: residual liability to charge).

(5)Subsection (1)—

(a)means that in any of those Chapters a reference to an employee does not include an employee whose employment is within the exclusion in that subsection, if the context is such that the reference is to an employee in relation to whom the Chapter applies, but

(b)does not restrict the meaning of references to employees in other contexts.

(6)Subsection (1) has effect subject to—

  • section 188(2) (discharge of loan: where employment becomes lower-paid),

  • section 195(3) (discharge of notional loan: where employment becomes lower-paid),

  • section 199(4) (disposal for more than market value: where employment becomes lower-paid), and

  • section 220 (employment in two or more related employments).

What is lower-paid employment

217Meaning of “lower-paid employment”

(1)For the purposes of this Chapter an employment is “lower-paid employment” in relation to a tax year if the earnings rate for the employment for the year (calculated under section 218) is less than £8,500.

(2)Subsection (1) is subject to section 220 (employment in two or more related employments).

218Calculation of earnings rate for a tax year

(1)For any tax year the earnings rate for an employment is to be calculated as follows—

  • Step 1

    Find the total of the following amounts—

    (a)

    the total amount of the earnings from the employment for the year within Chapter 1 of this Part,

    (b)

    the total of any amounts that are treated as earnings from the employment for the year under the benefits code (see subsections (2) and (3)),

    (c)

    the total of any amounts that are treated as earnings from the employment for the year under Chapter 12 of this Part (payments treated as earnings), and

    (d)

    in the case of an employment within section 56(2) (deemed employment of worker by intermediary), the amount of the deemed employment payment for the year (see section 54),

    excluding any exempt income.

  • Step 2

    Add to that total any extra amount required to be added for the year by section 219 (extra amounts to be added in connection with a car).

  • Step 3

    Subtract the total amount of any authorised deductions (see subsection (4)) from the result of step 2.

  • Step 4

    The earnings rate for the employment for the year is given by the formula—

    Formula - R multiplied by (Y divided by E)

    where—

    • R is the result of step 3,

    • Y is the number of days in the year, and

    • E is the number of days in the year when the employment is held.

(2)Section 216(1) (provisions not applicable to lower-paid employment) is to be disregarded for the purpose of determining any amount under step 1.

(3)If the benefit of living accommodation is to be taken into account under step 1, the cash equivalent is to be calculated in accordance with section 105 (even if the cost of providing the accommodation exceeds £75,000).

(4)For the purposes of step 3 “authorised deduction” means any deduction that would (assuming it was an amount of taxable earnings) be allowed from any amount within step 1 under—

  • section 346 (employee liabilities),

  • section 352 (agency fees paid by entertainers),

  • section 355 (corresponding payments by non-domiciled employees with foreign employers),

  • section 368 (fixed sum deductions from earnings payable out of public revenue),

  • section 370 (travel costs and expenses where duties performed abroad: employee’s travel),

  • section 371 (travel costs and expenses where duties performed abroad: visiting spouse’s or child’s travel),

  • section 373 (non-domiciled employee’s travel costs and expenses where duties performed in UK),

  • section 374 (non-domiciled employee’s spouse’s or child’s travel costs and expenses where duties performed in UK),

  • section 376 (foreign accommodation and subsistence costs and expenses (overseas employments)),

  • section 377 (costs and expenses in respect of personal security assets and services),

  • section 713 (payroll giving to charities),

  • section 592(7) of ICTA (contributions to exempt approved schemes),

  • section 594 of ICTA (contributions to exempt statutory schemes), or

  • section 262 of CAA 2001 (capital allowances to be given effect by treating them as deductions).

219Extra amounts to be added in connection with a car

(1)The provisions of this section apply for the purposes of section 218(1) in the case of a tax year in which a car is made available as mentioned in section 114(1) (cars, vans and related benefits) by reason of the employment.

(2)Subsection (3) applies if in the tax year—

(a)an alternative to the benefit of the car is offered, and

(b)the amount that would be earnings within Chapter 1 of this Part if the benefit of the car were to be determined by reference to the alternative offered exceeds the benefit code earnings (see subsection (4)).

(3)The amount of the excess is an extra amount to be added under step 2 in section 218(1).

(4)For the purposes of subsection (2) “the benefit code earnings” is the total for the year of—

(a)the cash equivalent of the benefit of the car (calculated in accordance with Chapter 6 of this Part), and

(b)the cash equivalent (calculated in accordance with that Chapter) of the benefit of any fuel provided for the car by reason of the employment.

(5)Subsection (6) applies if in the tax year there would be an amount of general earnings consisting of—

(a)earnings within Chapter 1 of this Part, or

(b)an amount treated as earnings from the employment under Chapter 3 (expenses payments) or Chapter 4 (vouchers and credit-tokens) of this Part,

if section 239 or 269 (exemptions in respect of payments or benefits connected with taxable cars etc.) did not apply to the discharge of a liability, or to a payment or benefit, in connection with the car.

(6)The amount of general earnings mentioned in subsection (5) is an extra amount to be added under step 2 in section 218(1).

(7)Section 216(1) (provisions not applicable to lower-paid employment) is to be disregarded for the purpose of determining any amount under this section.

Treatment of related employments

220Related employments

(1)This section applies if a person is employed in two or more related employments.

(2)None of the employments is to be regarded as lower-paid employment in relation to a tax year if—

(a)the total of the earnings rates for the employments for the year (calculated in each case under section 218) is £8,500 or more, or

(b)any of them is an employment falling outside the exclusion contained in section 216(1) (provisions not applicable to lower-paid employment).

(3)For the purposes of this section two employments are “related” if—

(a)both are with the same employer, or

(b)one is with a body or partnership (“A”) and the other is either—

(i)with an individual, partnership or body that controls A (“B”), or

(ii)with another partnership or body also controlled by B.

Chapter 12Payments treated as earnings

221Payments where employee absent because of sickness or disability

(1)This section applies if—

(a)an employee is absent from work because of sickness or disability, and

(b)a qualifying sickness payment is made in respect of the employee’s absence from work.

(2)But this section does not apply if the qualifying sickness payment constitutes earnings from the employment by virtue of any other provision.

(3)The qualifying sickness payment is to be treated as earnings from the employment in respect of the period of absence.

(4)If the qualifying sickness payment is made from funds to which the employer and the employer’s employees have made contributions, only the amount of the payment which it is just and reasonable to attribute to the employer’s contributions is treated as earnings under this section.

(5)In this section “qualifying sickness payment” means a payment which meets conditions A and B.

(6)Condition A is that the payment is made—

(a)to the employee or to a member of the employee’s family,

(b)to the order of such a person, or

(c)to the benefit of such a person.

(7)Condition B is that the payment is made—

(a)by reason of the employment, and

(b)as a result of arrangements entered into by the employer.

222Payments by employer on account of tax where deduction not possible

(1)This section applies if—

(a)an employer is treated by virtue of sections 687, 689 and 693 to 700 as having made a payment of income of an employee (“the notional payment”),

(b)the employer is required by virtue of section 710(4) to account to the Inland Revenue for an amount of income tax (“the due amount”) in respect of the notional payment, and

(c)the employee does not, before the end of the period of 30 days beginning with the date on which the employer is treated as making the notional payment, make good the due amount to the employer.

(2)The due amount is to be treated as earnings from the employment for the tax year in which the date mentioned in subsection (1)(c) falls.

(3)In this section “employer”, in relation to any provision of sections 687, 689, 693 to 700 or 710, means the person taken to be the employer for the purposes of that provision.

It also includes a person who is treated as making a payment of PAYE income by virtue of section 689(2) (payments by person for whom employee works but who is not the employer).

223Payments on account of director’s tax other than by the director

(1)This section applies if in a tax year—

(a)a person (“P”) makes a payment to another person who is employed as the director of a company,

(b)the payment is of, or on account of, earnings from the director’s employment,

(c)PAYE regulations require P to deduct an amount of income tax (“the deductible tax”),

(d)P deducts none, or only some, of the deductible tax, and

(e)either or both of the following occur—

(i)P accounts to the Board of Inland Revenue for some or all of the deductible tax (whether or not P has actually deducted the amount accounted for);

(ii)one or more persons other than P (apart from the director) account to the Board of Inland Revenue for some or all of the deductible tax.

(2)For the purposes of this section it does not matter whether the director’s employment is held at the time when P makes the payment mentioned in subsection (1)(a) so long as it is held at some point in the tax year in which the payment is made.

(3)References in this section to employment as a director accordingly include prospective or past employment as a director.

(4)The deductible tax accounted for to the Board of Inland Revenue is to be treated as earnings of the director from the director’s employment for the tax year in which it is accounted for.

(5)But if—

(a)the deductible tax is accounted for after the director’s employment has ceased, and

(b)the employment ceased in a tax year before the one in which the deductible tax is accounted for,

the deductible tax is treated as earnings for the tax year in which the director’s employment ceased.

(6)The following rules apply to the calculation of the amount to be treated as earnings under this section—

(a)any amount accounted for after the death of the director is to be disregarded;

(b)if P deducts some of the deductible tax, the amount treated as earnings is reduced by the amount deducted;

(c)if the director makes good to P or to another person some or all of the deductible tax which P or the other person accounts for, the amount treated as earnings is reduced by the amount made good.

(7)This section does not apply if the director has no material interest in the company and either—

(a)the director is employed as a full-time working director of the company, or

(b)the company is—

(i)non-profit-making, or

(ii)established for charitable purposes only.

(8)In this section—

  • “director” has the same meaning as in the benefits code (see section 67);

  • “director’s employment”, in relation to a person who is employed as a director, means that employment;

  • “full-time working director” has the same meaning as in the benefits code (see section 67);

  • “material interest” has the same meaning as in the benefits code (see section 68);

  • “non-profit-making”, in relation to a company, means that—

    (a)

    the company does not carry on a trade, and

    (b)

    its functions do not consist wholly or mainly in the holding of investments or other property.

224Payments to non-approved personal pension arrangements

(1)Contributions paid by an employer under non-approved personal pension arrangements made by the employee are to be treated as earnings from the employment for the tax year in which they are paid.

(2)Subsection (1) does not apply if or to the extent that the contributions are chargeable to income tax as the employee’s income apart from this section.

(3)For the purposes of this section—

(a)“personal pension arrangements” has the meaning given by section 630(1) of ICTA, and

(b)arrangements are “non-approved” if they are not “approved” within the meaning of that section.

225Payments for restrictive undertakings

(1)This section applies where—

(a)an individual gives a restrictive undertaking in connection with the individual’s current, future or past employment, and

(b)a payment is made in respect of—

(i)the giving of the undertaking, or

(ii)the total or partial fulfilment of the undertaking.

(2)It does not matter to whom the payment is made.

(3)The payment is to be treated as earnings from the employment for the tax year in which it is made.

(4)Subsection (3) does not apply if the payment constitutes earnings from the employment by virtue of any other provision.

(5)A payment made after the death of the individual who gave the undertaking is treated for the purposes of this section as having been made immediately before the death.

(6)This section applies only where—

(a)the earnings from the employment are general earnings to which any of the provisions mentioned in subsection (7) apply, or

(b)if there were general earnings from the employment they would be general earnings to which any of those provisions apply.

(7)The provisions are—

(a)section 15 (earnings of employee resident, ordinarily resident and domiciled in the UK),

(b)section 21 (earnings of employee resident and ordinarily resident, but not domiciled, in UK, except chargeable overseas earnings),

(c)section 25 (UK-based earnings of employee resident but not ordinarily resident in UK), and

(d)section 27 (UK-based earnings of employee not resident in UK).

(8)In this section “restrictive undertaking” means an undertaking which restricts the individual’s conduct or activities.

For this purpose it does not matter whether or not the undertaking is legally enforceable or is qualified.

226Valuable consideration given for restrictive undertakings

(1)In a case where—

(a)an individual gives a restrictive undertaking in connection with the individual’s current, future or past employment, and

(b)valuable consideration that is not in the form of money is provided in respect of—

(i)the giving of the undertaking, or

(ii)the total or partial fulfilment of the undertaking,

section 225 applies as it would if a payment of an amount equal to the value of the consideration had been made instead.

(2)For this purpose—

(a)merely assuming an obligation to make over or provide valuable property, rights or advantages is not valuable consideration, but

(b)wholly or partially discharging such an obligation is.

Part 4Employment income: exemptions

Chapter 1Exemptions: general

227Scope of Part 4

(1)This Part contains—

(a)earnings-only exemptions, and

(b)employment income exemptions.

(2)In this Act “earnings-only exemption” means an exemption from income tax which—

(a)prevents liability to tax arising in respect of earnings, either by virtue of one or more particular provisions (such as a Chapter of the benefits code) or at all, and

(b)does not prevent liability to tax arising in respect of other employment income.

(3)In this Act “employment income exemption” means an exemption from income tax which prevents liability to tax arising in respect of employment income of any kind at all.

(4)The following provisions in Part 7 also confer exemption from liability to income tax in respect of earnings—

(a)section 426 (conditional interests in shares: no charge in respect of acquisition of employee’s interest in certain circumstances),

(b)section 474 (share options: no charge in respect of receipt of shorter- term option),

(c)sections 489 to 493 and sections 496 to 499 (approved share incentive plans),

(d)section 518 (approved SAYE option schemes: no charge in respect of receipt of option),

(e)section 519 (approved SAYE option schemes: no charge in respect of exercise of option),

(f)section 523 (approved CSOP schemes: no charge in respect of receipt of option),

(g)section 524 (approved CSOP schemes: no charge in respect of exercise of option),

(h)section 528 (enterprise management incentives: no charge on receipt of qualifying option),

(i)section 542 (priority share allocations: exemption where offer made to public and employees), and

(j)section 544 (priority share allocations: exemption where different offers made to public and employees).

228Effect of exemptions on liability under provisions outside Part 2

(1)The exemptions conferred by the provisions specified in subsection (2) prevent liability to income tax arising under any enactment, but the other exemptions in this Part only affect liability to income tax under Part 2 of this Act.

(2)The provisions referred to in subsection (1) are—

(a)section 245 (travelling and subsistence during public transport strikes),

(b)section 248 (transport home: late night working and failure of car-sharing arrangements),

(c)section 264 (annual parties and functions),

(d)Chapter 8 of this Part (exemptions for special kinds of employees) except for sections 290 and 291,

(e)section 323 (long service awards),

(f)section 324 (small gifts from third parties), and

(g)section 326 (expenses incidental to transfer of a kind not normally met by transferor).

Chapter 2Exemptions: mileage allowances and passenger payments

Mileage allowances

229Mileage allowance payments

(1)No liability to income tax arises in respect of approved mileage allowance payments for a vehicle to which this Chapter applies (see section 235).

(2)Mileage allowance payments are amounts, other than passenger payments (see section 233), paid to an employee for expenses related to the employee’s use of such a vehicle for business travel (see section 236(1)).

(3)Mileage allowance payments are approved if, or to the extent that, for a tax year, the total amount of all such payments made to the employee for the kind of vehicle in question does not exceed the approved amount for such payments applicable to that kind of vehicle (see section 230).

(4)Subsection (1) does not apply if—

(a)the employee is a passenger in the vehicle, or

(b)the vehicle is a company vehicle (see section 236(2)).

230The approved amount for mileage allowance payments

(1)The approved amount for mileage allowance payments that is applicable to a kind of vehicle is—

M × R

where—

  • M is the number of miles of business travel by the employee (other than as a passenger) using that kind of vehicle in the tax year in question;

  • R is the rate applicable to that kind of vehicle.

(2)The rates applicable are as follows—

Table
Kind of vehicleRate per mile
Car or van40p for the first 10,000 miles
25p after that
Motor cycle24p
Cycle20p

(3)The reference in subsection (2) to “the first 10,000 miles” is to the total number of miles of business travel in relation to the employment, or any associated employment, by car or van in the tax year in question.

(4)One employment is associated with another if—

(a)the employer is the same;

(b)the employers are partnerships or bodies and an individual or another partnership or body has control over both of them; or

(c)the employers are associated companies within the meaning of section 416 of ICTA.

(5)In subsection (4)(b)—

(a)“control”, in relation to a body corporate or partnership, has the meaning given by section 840 of ICTA (in accordance with section 719 of this Act), and

(b)the definition of “control” in that section of that Act applies (with the necessary modifications) in relation to an unincorporated association as it applies in relation to a body corporate.

(6)The Treasury may by regulations amend subsection (2) so as to alter the rates or rate bands.

231Mileage allowance relief

(1)An employee is entitled to mileage allowance relief for a tax year—

(a)if the employee uses a vehicle to which this Chapter applies for business travel, and

(b)the total amount of all mileage allowance payments, if any, made to the employee for the kind of vehicle in question for the tax year is less than the approved amount for such payments applicable to that kind of vehicle.

(2)The amount of mileage allowance relief to which an employee is entitled for a tax year is the difference between—

(a)the total amount of all mileage allowance payments, if any, made to the employee for the kind of vehicle in question, and

(b)the approved amount for such payments applicable to that kind of vehicle.

(3)Subsection (1) does not apply if—

(a)the employee is a passenger in the vehicle, or

(b)the vehicle is a company vehicle.

232Giving effect to mileage allowance relief

(1)A deduction is allowed for mileage allowance relief to which an employee is entitled for a tax year.

(2)If any of the employee’s earnings—

(a)are taxable earnings in the tax year in which the employee receives them, and

(b)are not also taxable earnings in that year that fall within subsection (3),

the relief is allowed as a deduction from those earnings in calculating net taxable earnings in the year.

(3)If any of the employee’s earnings are taxable earnings in the tax year in which the employee remits them to the United Kingdom, there may be deducted from those earnings the amount of any mileage allowance relief—

(a)for that tax year, and

(b)for any earlier tax year in which the employee was resident in the United Kingdom,

which, on the assumptions mentioned in subsection (4), would have been deductible under subsection (2).

(4)The assumptions are—

(a)that subsection (2)(b) does not apply, and

(b)where applicable, that the earnings constitute taxable earnings in the tax year in which the employee receives them.

(5)Subsection (3) applies only to the extent that the mileage allowance relief cannot be deducted under subsection (2).

(6)A deduction shall not be made twice, whether under subsection (2) or (3), in respect of the same mileage allowance relief.

(7)In this section “taxable earnings” or “net taxable earnings” means taxable earnings or net taxable earnings from the employment for the purposes of Part 2.

Passenger payments

233Passenger payments

(1)No liability to income tax arises in respect of approved passenger payments made to an employee for the use of a car or van (whether or not it is a company vehicle) if—

(a)the employee receives mileage allowance payments for the use of the car or van, and

(b)the cash equivalent of the benefit of the car or van is treated as earnings from the employment by virtue of section 120 or 154 (cars and vans as benefits).

This is subject to subsection (2).

(2)The condition in subsection (1)(b) needs to be met only if the car or van is made available to the employee by reason of the employment.

(3)Passenger payments are amounts paid to an employee because, while using a car or van for business travel, the employee carries in it one or more passengers who are also employees for whom the travel is business travel.

(4)Passenger payments are approved if, or to the extent that, for a tax year, the total amount of all such payments made to the employee does not exceed the approved amount for such payments (see section 234).

(5)Section 117 (when cars and vans are made available by reason of employment) applies for the purposes of subsection (2).

234The approved amount for passenger payments

(1)The approved amount for passenger payments is—

M × R

where—

  • M is the number of miles of business travel by the employee by car or van—

    (a)

    for which the employee carries in the tax year in question one or more passengers who are also employees for whom the travel is business travel, and

    (b)

    in respect of which passenger payments are made;

  • R is a rate of 5p per mile.

(2)If the employee carries for all or part of the tax year two or more passengers who are also employees for whom the travel is business travel, the approved amount for passenger payments is the total of the amounts calculated separately under subsection (1) in respect of each of those passengers.

(3)The Treasury may by regulations amend subsection (1) so as to alter the rate.

Supplementary

235Vehicles to which this Chapter applies

(1)This Chapter applies to cars, vans, motor cycles and cycles.

(2)“Car” means a mechanically propelled road vehicle which is not—

(a)a goods vehicle,

(b)a motor cycle, or

(c)a vehicle of a type not commonly used as a private vehicle and unsuitable to be so used.

(3)“Van” means a mechanically propelled road vehicle which—

(a)is a goods vehicle, and

(b)has a design weight not exceeding 3,500 kilograms,

and which is not a motor cycle.

(4)“Motor cycle” has the meaning given by section 185(1) of the Road Traffic Act 1988 (c. 52).

(5)“Cycle” has the meaning given by section 192(1) of that Act.

(6)In this section—

  • “design weight” means the weight which a vehicle is designed or adapted not to exceed when in normal use and travelling on a road laden;

  • “goods vehicle” means a vehicle of a construction primarily suited for the conveyance of goods or burden of any description.

236Interpretation of this Chapter

(1)In this Chapter—

  • “business travel” means travelling the expenses of which, if incurred and paid by the employee in question, would (if this Chapter did not apply) be deductible under sections 337 to 342;

  • “mileage allowance payments” has the meaning given by section 229(2);

  • “passenger payments” has the meaning given by section 233(3).

(2)For the purposes of this Chapter a vehicle is a “company vehicle” in a tax year if in that year—

(a)the vehicle is made available to the employee by reason of the employment and is not available for the employee’s private use, or

(b)the cash equivalent of the benefit of the vehicle is to be treated as the employee’s earnings for the tax year by virtue of—

(i)section 120 (benefit of car treated as earnings),

(ii)section 154 (benefit of van treated as earnings), or

(iii)section 203 (residual liability to charge: benefit treated as earnings), or

(c)in the case of a car or van, the cash equivalent of the benefit of the car or van would be required to be so treated if sections 167 and 168 (exceptions for pooled cars and vans) did not apply, or

(d)in the case of a cycle, the cash equivalent of the benefit of the cycle would be required to be treated as the employee’s earnings for the tax year under Chapter 10 of Part 3 (taxable benefits: residual liability to charge) if section 244(1) (exception for cycles made available) did not apply.

(3)Sections 117 and 118 (when cars and vans are made available by reason of employment and are made available for private use) apply for the purposes of subsection (2).

Chapter 3Exemptions: other transport, travel and subsistence

237Parking provision and expenses

(1)No liability to income tax arises by virtue of Chapter 10 of Part 3 (taxable benefits: residual liability to charge) in respect of the provision of workplace parking for an employee.

(2)No liability to income tax arises by virtue of the payment or reimbursement of expenses incurred in connection with the provision for or the use by an employee of workplace parking.

(3)In this section “workplace parking” means—

(a)a car parking space,

(b)a motor cycle parking space, or

(c)facilities for parking a cycle other than a motor cycle,

at or near the employee’s workplace.

238Modest private use of heavy goods vehicles

(1)No liability to income tax arises where a heavy goods vehicle is made available to an employee for the employee’s private use if conditions A and B are met.

(2)Condition A is that there is no transfer of the property in the vehicle to the employee.

(3)Condition B is that the employee’s use of the vehicle in the tax year is not wholly or mainly private use.

(4)In this section—

  • “heavy goods vehicle” means a mechanically propelled road vehicle which—

    (a)

    is of a construction primarily suited for the conveyance of goods or burden of any kind, and

    (b)

    is designed or adapted to have a maximum weight exceeding 3,500 kilograms when in normal use and travelling on a road laden, and

  • “private use” means use other than for travel which the employee is necessarily obliged to do in the performance of the duties of the employment.

239Payments and benefits connected with taxable cars and vans and exempt heavy goods vehicles

(1)No liability to income tax arises in respect of the discharge of any liability of an employee in connection with a taxable car or van or an exempt heavy goods vehicle.

(2)No liability to income tax arises in respect of a payment to an employee in respect of expenses incurred by the employee in connection with a taxable car or van or an exempt heavy goods vehicle.

(3)Subsections (1) and (2) do not apply to liability arising by virtue of section 149 (benefit of car fuel treated as earnings).

(4)No liability to income tax arises by virtue of Chapter 10 of Part 3 (taxable benefits: residual liability to charge) in respect of a benefit connected with a taxable car or van or an exempt heavy goods vehicle.

(5)Subsection (4) does not apply to the provision of a driver.

(6)For the purposes of this section a car or van is “taxable” if under Chapter 6 of Part 3 the cash equivalent of the benefit of it is to be treated as the employee’s earnings for the tax year.

(7)For the purposes of this section—

(a)“heavy goods vehicle” has the same meaning as in section 238(4) (modest private use of heavy goods vehicles), and

(b)a heavy goods vehicle is “exempt” if it is made available in the tax year to the employee in such circumstances that section 238 applies.

(8)For the purposes of subsections (1) and (2), a heavy goods vehicle is also “exempt” if it is so made available in such circumstances that section 238 would apply if the employee were not in excluded employment.

(9)In this Part “excluded employment” means an excluded employment within the meaning of the benefits code (see section 63(4)).

240Incidental overnight expenses and benefits

(1)No liability to income tax arises in respect of a sum if or to the extent that it is paid wholly and exclusively for the purpose of paying or reimbursing expenses which—

(a)are incidental to the employee’s absence from the place where the employee normally lives,

(b)relate to a continuous period of such absence in relation to which the overnight stay conditions are met (a “qualifying period”), and

(c)would not be deductible under Part 5 if the employee incurred and paid them and Chapter 2 of this Part (mileage allowances and passenger payments) did not apply.

(2)No liability to income tax arises by virtue of Chapter 10 of Part 3 (taxable benefits: residual liability to charge) in respect of a benefit provided for an employee if—

(a)its provision is incidental to such an absence during a qualifying period, and

(b)no amount would be deductible in respect of it under Part 5.

(3)Subsections (1) and (2) are subject to section 241 (incidental overnight expenses and benefits: overall exemption limit).

(4)The overnight stay conditions are that—

(a)the employee is obliged to stay away from the place where the employee normally lives throughout the period,

(b)the period includes at least one overnight stay away from that place, and

(c)each such overnight stay during the period is at a place the expenses of travelling to which meet condition A or B.

(5)Condition A is that the expenses are deductible under Part 5 (otherwise than under any of the excepted foreign travel provisions) or would be if the employee incurred and paid them and Chapter 2 of this Part did not apply.

(6)Condition B is that the expenses are within section 250 or 255 (exemption of work-related and individual learning account training provision) or would be if the employer paid or reimbursed them.

(7)In this section “excepted foreign travel provisions” means—

(a)section 371 (travel costs and expenses where duties performed abroad: visiting spouse’s or child’s travel),

(b)section 374 (non-domiciled employee’s spouse’s or child’s travel costs and expenses where duties performed in UK), and

(c)section 376 (foreign accommodation and subsistence costs and expenses (overseas employments)).

241Incidental overnight expenses and benefits: overall exemption limit

(1)Section 240(1) and (2) do not apply if the exemption provisions total in respect of the qualifying period in question exceeds the permitted amount.

(2)In this section “the exemption provisions total”, in respect of a period, means the aggregate of—

(a)the amounts that would be exempted under section 240(1) and (2) in respect of the period, apart from this section, and

(b)the amounts that would be exempted under section 268 (exemption of vouchers and tokens for incidental overnight expenses) in respect of the period, apart from the condition in section 268(5).

(3)In this section “the permitted amount”, in respect of a period, means the aggregate of the following amounts—

(a)£5 for each night during the period spent wholly in the United Kingdom, and

(b)£10 for each night during the period spent wholly or partly outside the United Kingdom.

242Works transport services

(1)No liability to income tax arises in respect of the provision for employees of a works transport service if—

(a)the service is available generally to employees of the employer (or each employer) concerned,

(b)the main use of the service is for qualifying journeys by those employees, and

(c)the service—

(i)is used only by the employees for whom it is provided or their children, or

(ii)is substantially used only by those employees or children.

(2)In this section—

  • “children” includes stepchildren and illegitimate children but does not include children aged 18 or over, and

  • “works transport service” means a service which is provided by means of a bus or a minibus for conveying employees of one or more employers on qualifying journeys.

(3)For the purposes of this section—

(a)“bus” means a road passenger vehicle which has a seating capacity of 12 or more, and

(b)“minibus” means a vehicle constructed or adapted for the carriage of passengers which has a seating capacity of 9, 10 or 11.

(4)But a vehicle which falls within the definition in subsection (3)(b) is not a minibus for the purposes of this section if—

(a)it has one or more disqualified seats, and

(b)excluding the disqualified seats, it has a seating capacity of 8 or less.

(5)For the purposes of subsections (3) and (4) the seating capacity of a vehicle is determined in the same way as for the purposes of Part 3 of Schedule 1 to VERA 1994 (vehicle excise duty on buses).

This applies whether or not the vehicle is a bus within the meaning of that Part of that Schedule.

(6)For the purposes of subsection (4) a seat is disqualified if relevant construction and use requirements are not met in relation to it.

In this subsection “construction and use requirements” has the same meaning as in Part 2 of the Road Traffic Act 1988 (c. 52) or, in Northern Ireland, Part III of the Road Traffic (Northern Ireland) Order 1995 (S.I. 1995/2994 (N.I. 18)).

243Support for public bus services

(1)No liability to income tax arises in respect of the provision of financial or other support for a public transport road service if—

(a)in the case of a local bus service, conditions A and B are met, or

(b)in any other case, conditions A to C are met.

(2)Condition A is that the service is used by employees of one or more employers for qualifying journeys.

(3)Condition B is that the service is available generally to employees of the employer (or each employer) concerned.

(4)Condition C is that the terms on which the service is available to the employees of the employer (or each employer) concerned are not more favourable than those available to other passengers.

(5)In this section—

  • “local bus service” means a local service (as defined in section 2 of the Transport Act 1985 (c. 67)), and

  • “public transport road service” means a public passenger transport service provided by means of a road vehicle.

244Cycles and cyclist’s safety equipment

(1)No liability to income tax arises by virtue of Chapter 10 of Part 3 (taxable benefits: residual liability to charge) in respect of the provision for an employee of a cycle or cyclist’s safety equipment if conditions A to C are met.

(2)Condition A is that there is no transfer of the property in the cycle or equipment in question.

(3)Condition B is that the employee uses the cycle or equipment in question mainly for qualifying journeys.

(4)Condition C is that cycles are available generally to employees of the employer concerned or, as the case may be, cyclist’s safety equipment is so available to them.

(5)In this section “cycle” has the meaning given by section 192(1) of the Road Traffic Act 1988 (c. 52), and “cyclist” has a corresponding meaning.

245Travelling and subsistence during public transport strikes

(1)No liability to income tax arises in respect of the following benefits and payments where a strike or other industrial action disrupts a public transport service normally used by an employee.

(2)They are—

(a)the provision for the employee of overnight accommodation at or near the employee’s permanent workplace,

(b)a payment to the employee in respect of expenses incurred by the employee in connection with such accommodation,

(c)the provision for the employee of transport for the purpose of ordinary commuting or travel between any two places that is for practical purposes substantially ordinary commuting, and

(d)a payment to the employee in respect of expenses incurred on such transport.

246Transport between work and home for disabled employees: general

(1)No liability to income tax arises in respect of—

(a)the provision of transport for a disabled employee, or

(b)the payment or reimbursement of expenses incurred on such transport,

if the condition in subsection (2) is met.

(2)The condition is that the transport is provided or the expenses are incurred for the purpose of ordinary commuting or travel between any two places that is for practical purposes substantially ordinary commuting.

(3)Subsection (1) does not apply in a case where a car is made available to a disabled employee (but see section 247).

(4)In this section “disabled employee” means an employee who has a physical or mental impairment with a substantial and long-term adverse effect on the employee’s ability to carry out normal day to day activities.

247Provision of cars for disabled employees

(1)This section applies where a car is made available to a disabled employee without any transfer of the property in it.

(2)No liability to income tax arises by virtue of Chapter 6 or 10 of Part 3 (taxable benefits: cars, vans etc. and residual liability to charge) in respect of the benefit if conditions A to C are met.

(3)No liability to income tax arises in respect of—

(a)the provision of fuel for the car, or

(b)the payment or reimbursement of expenses incurred in connection with it,

if conditions A to C are met.

(4)Condition A is that the car has been adapted for the employee’s special needs or, in the case of an employee who because of disability can only drive a car that has automatic transmission, it is such a car.

(5)Condition B is that the car is made available on terms prohibiting its use otherwise than for—

(a)the employee’s business travel, or

(b)transport for the employee for the purpose of—

(i)ordinary commuting or travel between any two places that is for practical purposes substantially ordinary commuting, or

(ii)travel to a place the expenses of travelling to which would be within one of the training exemption provisions if the employer paid them.

(6)Condition C is that in the tax year the car is only used in accordance with those terms.

(7)In this section—

  • “business travel” has the same meaning as in Chapter 6 of Part 3 (taxable benefits: cars, vans and related benefits) (see section 171(1)),

  • “disabled employee” has the same meaning as in section 246 (see subsection (4)), and

  • “the training exemption provisions” means—

    • section 250 (exemption of work-related training provision),

    • section 255 (exemption for contributions to individual learning account training), and

    • section 311 (retraining courses).

(8)Section 138(4) (when a car has automatic transmission) applies for the purposes of this section as it applies for the purposes of section 138.

248Transport home: late night working and failure of car-sharing arrangements

(1)No liability to income tax arises in respect of the provision of transport or the payment or reimbursement of expenses incurred on transport if—

(a)the transport is for a journey from the employee’s workplace to the employee’s home,

(b)the late working conditions or the car-sharing failure conditions are met, and

(c)the number of previous occasions in the tax year on which the provision of transport within this section or the payment or reimbursement of expenses within this section has occurred is lower than 60.

(2)The late working conditions are that—

(a)the journey is made on an occasion when the employee is required to work later than usual and until at least 9 p.m.,

(b)such occasions occur irregularly,

(c)by the time when the employee ceases work—

(i)public transport has ceased to be available for the journey, or

(ii)it would not be reasonable to expect the employee to use it, and

(d)the transport is by taxi or similar private road transport.

(3)The car-sharing failure conditions are that—

(a)the employee regularly travels to work in a car with one or more other employees of the employee’s employer under arrangements for the sharing of the car with them, and

(b)the journey is made on an occasion when the employee is unable to use the car because of unforeseen and exceptional circumstances.

249Interpretation of this Chapter

In this Chapter—

  • “car” and “van” have the same meaning as in Chapter 6 of Part 3 (taxable benefits: cars, vans and related benefits) (see section 115), except that for the purposes of sections 246 and 247 (transport for the disabled) any adaptation of a car for the employee’s special needs is to be disregarded,

  • “ordinary commuting” has the same meaning as in section 338 (travel for necessary attendance) (see subsection (3)),

  • “qualifying journey”, in relation to an employee, means the whole or part of a journey—

    (a)

    between the employee’s home and workplace,

    (b)

    between one workplace and another,

    in connection with the performance of the duties of the employment, and

  • “workplace” and “permanent workplace” have the meaning given by section 339.

Chapter 4Exemptions: education and training

Work-related training

250Exemption of work-related training provision

(1)No liability to income tax arises by virtue of—

(a)the provision for an employee of work-related training or any benefit incidental to such training, or

(b)the payment or reimbursement to or in respect of an employee of—

(i)the cost of work-related training or of any benefit incidental to such training, or

(ii)any costs of a kind specified in subsection (2) in respect of such training.

(2)The costs are—

(a)costs which are incidental to the employee undertaking the training,

(b)expenses incurred in connection with an examination or other assessment of what the employee has gained from the training, and

(c)the cost of obtaining any qualification, registration or award to which the employee becomes or may become entitled as a result of the training or such an examination or other assessment.

251Meaning of “work-related training”

(1)In this Chapter “work-related training”, in relation to an employee, means a training course or other activity designed to impart, instil, improve or reinforce any knowledge, skills or personal qualities which—

(a)are likely to prove useful to the employee when performing the duties of the employment or a related employment, or

(b)will qualify or better qualify the employee—

(i)to perform those duties, or

(ii)to participate in any charitable or voluntary activities that are available to be performed in association with the employment or a related employment.

(2)For this purpose “related employment”, in relation to an employee, means another employment with the same employer, or with a person connected with the employer, which the employee—

(a)is to hold,

(b)has a serious opportunity of holding, or

(c)can realistically expect to have a serious opportunity of holding in due course.

252Exception for non-deductible travel expenses

(1)Where travel or subsistence is provided or the costs of travel or subsistence are paid or reimbursed, section 250 does not apply except to the extent that the travel meets condition A or B or the subsistence meets condition B.

(2)Condition A is that, on the assumptions in subsection (4), mileage allowance relief under Chapter 2 of this Part would be available for the travel if no mileage allowance payments had been made.

(3)Condition B is that, on those assumptions, the expenses of the travel or subsistence would be deductible under Part 5.

(4)The assumptions are—

(a)that the employee undertook the training as one of the duties of the employment, and

(b)that the employee incurred and paid the expenses.

(5)In this section—

  • “mileage allowance payments” has the meaning given by section 229(2), and

  • “subsistence” includes food, drink and temporary living accommodation.

253Exception where provision for excluded purposes

(1)Section 250 does not apply if or to the extent that the facilities or other benefits that are provided or the costs of which are paid or reimbursed are provided to the employee for one or more of the following purposes.

(2)They are—

(a)enabling the employee to enjoy the facilities or benefits for entertainment or recreational purposes which are unconnected,

(b)providing the employee with an unconnected inducement to remain in or accept an employment with the employer or a person connected with the employer, and

(c)rewarding the employee for performing duties of the employment or performing them in a particular way.

(3)In subsection (2)(a) the reference to enjoying facilities or benefits for entertainment or recreational purposes includes a reference to enjoying them in the course of a leisure activity.

(4)In subsection (2)(a) and (b) “unconnected” means unconnected with imparting, instilling, improving or reinforcing knowledge, skills or personal qualities within section 251(1).

254Exception where unrelated assets are provided

(1)Section 250 does not apply if the benefit that is provided or the cost of which is paid or reimbursed is, or is the use of, an asset that is not a training-related asset.

(2)“Training-related asset”, in relation to work-related training provided to an employee, means—

(a)an asset provided for use only—

(i)in the course of the training, or

(ii)in the course of the training and in the performance of the duties of the employee’s employment,

(b)training materials provided in the course of the training, or

(c)something made by the employee in the course of the training or incorporated into something so made.

(3)For this purpose, “training materials” includes stationery, books or other written material, audio or video tapes, compact disks or floppy disks.

Individual learning account training

255Exemption for contributions to individual learning account training

(1)No liability to income tax in respect of income from a current or former employment arises by virtue of—

(a)the provision to a person within subsection (2) (“the employee”) of individual learning account training that is given by a person who is not the employee’s employer or former employer,

(b)any payment to the person giving the training in respect of the cost of that provision,

(c)the provision to the employee of any benefit incidental to such training, or

(d)the payment or reimbursement of any costs in respect of such training of a kind specified in subsection (3).

(2)A person is within this subsection if the person either—

(a)holds an account that qualifies under section 104 of the Learning and Skills Act 2000 (c. 21), or

(b)is a party to arrangements that qualify under section 105 or 106 of that Act or section 2 of the Education and Training (Scotland) Act 2000 (asp. 8).

(3)The costs are—

(a)costs which are incidental to the employee undertaking the training,

(b)expenses incurred in connection with an examination or other assessment of what the employee has gained from the training, and

(c)the cost of obtaining any qualification, registration or award to which the employee becomes or may become entitled as a result of the training or such an examination or other assessment.

256Meaning of “individual learning account training”

In this Chapter “individual learning account training” means training or education of a kind that qualifies for grants authorised by—

(a)regulations under section 108 or 109 of the Learning and Skills Act 2000 (c. 21), or

(b)regulations under section 1 of the Education and Training (Scotland) Act 2000.

257Exception for non-deductible travel expenses

(1)Where travel or subsistence is provided or the costs of travel or subsistence are paid or reimbursed, section 255 does not apply except to the extent that the travel meets condition A or B or the subsistence meets condition B.

(2)Condition A is that, on the assumptions in subsection (4), mileage allowance relief under Chapter 2 of this Part would be available for the travel if no mileage allowance payments had been made.

(3)Condition B is that, on those assumptions, the expenses of the travel or subsistence would be deductible under Part 5.

(4)The assumptions are—

(a)that the employee undertook the training as one of the duties of the employment, and

(b)that the employee incurred and paid the expenses.

(5)In this section—

  • “mileage allowance payments” has the meaning given by section 229(2), and

  • “subsistence” includes food, drink and temporary living accommodation.

258Exception where provision for excluded purposes

(1)Section 255 does not apply if or to the extent that the facilities or other benefits that are provided or made available, or the costs of which are paid or reimbursed, are provided or made available for either or both of the following purposes.

(2)They are—

(a)enabling the employee or former employee to enjoy the facilities or benefits for entertainment or recreational purposes, and

(b)rewarding the employee or former employee for performing duties of the employment or former employment or performing them in a particular way.

(3)In subsection (2)(a) the reference to enjoying facilities or benefits for entertainment or recreational purposes includes a reference to enjoying them in the course of a leisure activity.

259Exception where unrelated assets are provided

(1)Section 255 does not apply if the benefit that is provided, or the use of which is provided, or the cost of which is paid or reimbursed is an asset that is not a training-related asset.

(2)“Training-related asset”, in relation to individual learning account training provided to an employee or former employee, means—

(a)an asset provided—

(i)for use only in the course of the training, or

(ii)for use in the course of the training and in the performance of the duties of the employee’s employment, but not to any significant extent for any other use, or

(b)training materials provided in the course of the training, or

(c)something made by the employee or former employee in the course of the training or incorporated into something so made.

(3)For this purpose “training materials” includes stationery, books or other written material, audio or video tapes, compact disks or floppy disks.

260Exception where training not generally available to staff

(1)Section 255(1) only applies if any expenditure involved in making the provision, the payment or the reimbursement is incurred in giving effect to existing arrangements providing—

(a)for the person incurring it to contribute to costs arising from the undertaking of individual learning account training by the employer’s employees or former employees, and

(b)for such contributions to be generally available, on similar terms, to the employer’s employees at that time.

(2)In subsection (1) “existing arrangements” means arrangements in place when the agreement to incur the expenditure was made.

(3)The Treasury may by regulations make provision specifying the persons or other entities under whom Crown servants are to be treated for the purposes of this section as holding employment.

(4)Such regulations may—

(a)treat a description of Crown servants (or two or more such descriptions taken together) as an entity for the purposes of the regulations, and

(b)make different provision for different descriptions of Crown servants.

(5)In this section “Crown servant” means a person holding an employment under the Crown.

Chapter 5Exemptions: recreational benefits

Recreational facilities

261Exemption of recreational benefits

(1)No liability to income tax arises in respect of the provision to an employee or a member of an employee’s family or household of benefits within subsection (2).

(2)The benefits are—

(a)sporting or other recreational facilities which meet conditions A to C, and

(b)a right or opportunity to make use of such facilities.

This is subject to section 262.

(3)Condition A is that the facilities are available generally to the employees of the employer in question.

(4)Condition B is that they are not available to members of the public generally.

(5)Condition C is that they are used wholly or mainly by persons whose right or opportunity to use them is employment-related (whether or not by reference to the same employer).

(6)A person’s right or opportunity to use facilities is “employment-related” if and only if—

(a)it derives from the person being—

(i)an employee or former employee, or

(ii)a member or former member of the family or household of an employee or former employee,

of a particular employer, and

(b)the facilities are provided so as to be available generally to that employer’s employees.

262Benefits not exempted by section 261

(1)Section 261 (exemption of recreational benefits) does not apply to the following benefits—

(a)an interest in or the use of any of the following—

(i)a mechanically propelled vehicle,

(ii)holiday or other overnight accommodation, or

(iii)facilities which include, or are provided in association with, a right or opportunity to make use of holiday or overnight accommodation,

(b)facilities provided on domestic premises, or

(c)a right or opportunity to make use of facilities within paragraph (a) or (b).

(2)In this section—

  • “domestic premises” means—

    (a)

    premises used wholly or mainly as a private dwelling, or

    (b)

    land or other premises belonging to, or enjoyed with, premises so used, and

  • “vehicle” includes a ship, boat or other vessel, an aircraft and a hovercraft.

263Power to alter benefits to which section 261 applies

The Treasury may by regulations provide that section 261—

(a)does not apply to a benefit specified in the regulations,

(b)applies to a benefit so specified only where such conditions as the regulations specify are met in relation to the terms on which, and the persons to whom, it is provided, or

(c)applies in such cases as are so specified to—

(i)facilities that do not meet the conditions in section 261(3) to (5), or

(ii)a benefit within section 262.

Annual parties and functions

264Annual parties and functions

(1)This section applies to an annual party or similar annual function provided for an employer’s employees and available to them generally or available generally to those at a particular location.

(2)Where in the tax year only one annual party or similar annual function to which this section applies is provided for the employer’s employees, or the employees in question, no liability to income tax arises in respect of its provision if the cost per head of the party or function does not exceed £75.

(3)Where in the tax year two or more such parties or functions are so provided, no liability to income tax arises in respect of the provision of one or more of them (“the exempt party or parties”) if the cost per head of the exempt party or parties does not exceed £75 or £75 in aggregate.

(4)For the purposes of this section, the cost per head of a party or function is the total cost of providing—

(a)the party or function, and

(b)any transport or accommodation incidentally provided for persons attending it (whether or not they are the employer’s employees),

divided by the number of those persons.

(5)That total cost includes any value added tax on the expenses incurred in providing the party, function, transport or accommodation.

Entertainment

265Third party entertainment

(1)No liability to income tax arises in respect of the provision of entertainment for an employee or a member of the employee’s family or household if conditions A to C are met.

(2)Condition A is that the person providing the entertainment is not the employer or a person connected with the employer.

(3)Condition B is that neither the employer nor a person connected with the employer has directly or indirectly procured its provision.

(4)Condition C is that it is not provided—

(a)in recognition of particular services performed by the employee in the course of the employment, or

(b)in anticipation of particular services to be so performed.

(5)In this section “entertainment” includes hospitality of any kind.

Chapter 6Exemptions: non-cash vouchers and credit-tokens

General exemptions: use for exempt benefits

266Exemption of non-cash vouchers for exempt benefits

(1)No liability to income tax arises by virtue of Chapter 4 of Part 3 (taxable benefits: vouchers and credit-tokens) in respect of a non-cash voucher if or to the extent that the voucher is used to obtain anything the direct provision of which would fall within—

(a)section 237(1) (parking provision),

(b)section 246 (transport between home and work for disabled employees: general),

(c)section 247 (provision of cars for disabled employees),

(d)section 248 (transport home: late night working and failure of car-sharing arrangements), or

(e)section 265 (third party entertainment).

(2)No liability to income tax arises by virtue of Chapter 4 of Part 3 (taxable benefits: vouchers and credit-tokens) in respect of a non-cash voucher if the voucher evidences the employee’s entitlement to use anything the direct provision of which would fall within—

(a)section 242 (works transport services),

(b)section 243 (support for public bus services), or

(c)section 244 (cycles and cyclist’s safety equipment).

(3)No liability to income tax arises by virtue of Chapter 4 of Part 3 (taxable benefits: vouchers and credit-tokens) in respect of a non-cash voucher if the voucher can only be used to obtain anything the direct provision of which would fall within—

(a)section 245 (travelling and subsistence during public transport strikes),

(b)section 261 (exemption of recreational benefits),

(c)section 264 (annual parties and functions),

(d)section 296 (armed forces' leave travel facilities), or

(e)section 317 (subsidised meals).

(4)No liability to income tax arises by virtue of Chapter 4 of Part 3 (taxable benefits: vouchers and credit-tokens) in respect of a non-cash voucher if the voucher evidences the employee’s entitlement to a benefit in respect of which no charge arises by virtue of Chapter 10 of Part 3 (taxable benefits: residual liability to charge) because of regulations under section 210 (power to exempt minor benefits).

(5)For the purposes of this section direct provision is taken to fall within a section if it would do so if the employee were not in excluded employment.

267Exemption of credit-tokens used for exempt benefits

(1)No liability to income tax arises by virtue of Chapter 4 of Part 3 (taxable benefits: vouchers and credit-tokens) in respect of a credit-token if or to the extent that the token is used to obtain anything the direct provision of which—

(a)would fall within one of the provisions specified in subsection (2), or

(b)would do so if the employee were not in excluded employment.

(2)Those provisions are—

(a)section 237(1) (parking provision),

(b)section 245 (travelling and subsistence during public transport strikes),

(c)section 246 (transport between home and work for disabled employees: general),

(d)section 247 (provision of cars for disabled employees),

(e)section 248 (transport home: late night working and failure of car-sharing arrangements), and

(f)section 265 (third party entertainment).

Exemptions for particular non-cash vouchers and credit-tokens

268Exemption of vouchers and tokens for incidental overnight expenses

(1)No liability to income tax arises by virtue of Chapter 4 of Part 3 (taxable benefits: vouchers and credit-tokens) in respect of a non-cash voucher or a credit-token if or to the extent that the voucher or token is used by an employee to obtain goods, services or money if conditions A to C are met.

(2)In the case of goods or services, condition A is that—

(a)obtaining them is incidental to the employee’s absence from the place where the employee normally lives, and

(b)that absence is for a continuous period in relation to which the overnight stay conditions are met (“the qualifying period”).

(3)In the case of money, condition A is that—

(a)it is obtained for the purpose of obtaining goods or services, and

(b)obtaining them is incidental to such an absence during such a period.

(4)Condition B is that an amount would not be deductible under section 362 or 363 (deductions where non-cash voucher or credit-token provided) in respect of the cost of obtaining the goods or services.

(5)Condition C is that the exemption provisions total in respect of the qualifying period does not exceed the permitted amount.

(6)In this section—

  • “the overnight stay conditions” has the same meaning as in section 240 (exemption of incidental overnight expenses and benefits) (see section 240(4)), and

  • “the exemption provisions total” and “the permitted amount” have the same meaning as in section 241 (incidental overnight expenses and benefits: overall exemption limit) (see section 241(2) and (3)).

269Exemption where benefits or money obtained in connection with taxable car or van or exempt heavy goods vehicle

(1)No liability to income tax arises by virtue of Chapter 4 of Part 3 (taxable benefits: vouchers and credit-tokens) in respect of a non-cash voucher or a credit-token if or to the extent that the voucher or token is used by the employee or a member of the employee’s family for obtaining—

(a)goods or services in connection with a taxable car or van or an exempt heavy goods vehicle, or

(b)money which is spent on such goods or services.

(2)Subsection (1) applies where the goods in question are fuel for a car, but see section 149(3) (by virtue of which such use of a voucher or token is treated as the provision of the fuel for the purposes of section 149 (benefit of car fuel treated as earnings)).

(3)For the purposes of this section—

(a)“car” and “van” have the meaning given by section 115, and

(b)a car or van is “taxable” if the cash equivalent of the benefit of it is treated as the employee’s earnings for the tax year in which the voucher or token is used under Chapter 6 of Part 3 (taxable benefits: cars, vans and related benefits).

(4)For the purposes of this section—

(a)“heavy goods vehicle” has the same meaning as in section 238 (modest private use of heavy goods vehicles), and

(b)a heavy goods vehicle is “exempt” if it is made available in the tax year to the employee in such circumstances that section 238 applies or would apply if the employee were not in excluded employment.

270Exemption for small gifts of vouchers and tokens from third parties

(1)No liability to income tax arises by virtue of Chapter 4 of Part 3 (taxable benefits: vouchers and credit-tokens) in respect of a non-cash voucher or a credit-token if conditions A to C are met.

(2)Condition A is that the voucher or token is provided as a gift.

(3)Condition B is that it is only capable of being used to obtain goods.

(4)Condition C is that it meets conditions A to C and E in section 324 (general exemption of small gifts from third parties).

Chapter 7Exemptions: removal benefits and expenses

Exemption of removal benefits and expenses: general

271Limited exemption of removal benefits and expenses: general

(1)No liability to income tax in respect of earnings arises by virtue of—

(a)the provision of removal benefits to which this section applies, or

(b)the payment or reimbursement of removal expenses to which this section applies.

(2)Subsection (1) does not apply if (disregarding this section) the earnings are general earnings to which either of the following sections applies—

(a)section 22 (chargeable overseas earnings for year when employee resident and ordinarily resident, but not domiciled, in UK), or

(b)section 26 (foreign earnings for year when employee resident, but not ordinarily resident, in UK).

(3)Subsection (1) is subject to section 287 (limit on exemption).

272Removal benefits and expenses to which section 271 applies

(1)Benefits are removal benefits to which section 271 applies if—

(a)they are reasonably provided in connection with a change of the employee’s residence which meets the conditions in section 273,

(b)they are provided on or before the limitation day (see section 274), and

(c)they are within subsection (2) or one of the following provisions—

(i)section 277 (acquisition benefits and expenses),

(ii)section 278 (abortive acquisition benefits and expenses),

(iii)section 279 (disposal benefits and expenses),

(iv)section 280 (transporting belongings),

(v)section 281 (travelling and subsistence),

(vi)section 285 (replacement of domestic goods).

(2)A benefit is within this subsection if it is a non-cash voucher, cash voucher or credit-token used—

(a)to obtain goods or services the direct provision of which would be a benefit within one of the provisions specified in subsection (1)(c)(i) to (vi), or

(b)to obtain money for the purpose of obtaining such goods or services or meeting expenses within one of those provisions or section 284 (bridging loan expenses).

(3)Expenses are removal expenses to which section 271 applies if—

(a)they are reasonably incurred by the employee in connection with a change of the employee’s residence which meets the conditions in section 273,

(b)they are incurred on or before the limitation day, and

(c)they are within one of the provisions referred to in subsection (1)(c)(i) to (vi) or within section 284 (bridging loan expenses).

273Conditions applicable to change of residence

(1)The conditions referred to in section 272(1)(a) and (3)(a) which apply to the change of the employee’s residence are conditions A to C.

(2)Condition A is that the change of residence results from one of the following changes—

(a)the employee becoming employed,

(b)an alteration of the duties of the employment, or

(c)an alteration of the place where the employee is normally to perform those duties.

(3)Condition B is that the change of residence is made wholly or mainly to allow the employee to reside within a reasonable daily travelling distance of the place where the employee normally performs or is normally to perform the duties of the employment after the employment change (see section 275).

(4)Condition C is that the employee’s former residence is not within a reasonable daily travelling distance of that place.

274Meaning of “the limitation day”

(1)In this Chapter “the limitation day”, in relation to an employee’s change of residence, means the last day of the tax year after that in which the employee begins to perform the duties of the employment after the employment change, but this is subject to any direction under subsection (2).

(2)The Inland Revenue may direct that the last day of a later tax year is the limitation day in relation to any particular change of residence if it appears to them reasonable to do so having regard to all the circumstances of that change.

275Meaning of “the employment change”

In this Chapter “the employment change”, in relation to an employee’s change of residence, means whichever of the changes specified in section 273(2) results in the change of residence.

276Meaning of “residence”, “former residence” and “new residence” etc.

(1)If an employee has more than one residence, references in this Chapter to the employee’s residence are references to the employee’s main residence.

(2)In this Chapter, in relation to a change of the employee’s residence—

(a)references to the former residence are references to the employee’s residence before the change, and

(b)references to the new residence are references to the employee’s residence after the change.

(3)In this Chapter references to an interest in a residence are, in the case of a building, references to an estate or interest in the land concerned.

Benefits and expenses within this Chapter

277Acquisition benefits and expenses

(1)This section applies if an interest in the employee’s new residence is acquired by—

(a)the employee,

(b)one or more members of the employee’s family or household, or

(c)the employee and one or more members of the employee’s family or household.

(2)The following benefits are within this section—

(a)legal services connected with the acquisition of the interest, including legal services connected with any loan raised by the employee to acquire it,

(b)the waiving of any procurement fees connected with any such loan,

(c)the waiving of any amount payable in respect of insurance effected to cover risks incurred by the maker of any such loan because the loan equals the whole, or a substantial part, of the value of the interest,

(d)any survey or inspection of the residence undertaken in connection with the acquisition, and

(e)the connection of any utility serving the new residence for use by the employee or by the employee and one or more members of the employee’s family or household.

(3)The following expenses are within this section—

(a)sums paid for any services within subsection (2)(a), (d) or (e),

(b)any procurement fees connected with any loan raised by the employee to acquire the interest,

(c)the costs of any insurance within subsection (2)(c),

(d)fees payable to an appropriate registry or appropriate register in connection with the acquisition, and

(e)stamp duty charged on the acquisition.

(4)In this section references to a loan raised by the employee include a loan raised by—

(a)one or more members of the employee’s family or household, or

(b)the employee and one or more members of the employee’s family or household.

(5)In this section—

  • “appropriate registry” means—

    (a)

    Her Majesty’s Land Registry,

    (b)

    the Land Registry in Northern Ireland, or

    (c)

    the Registry of Deeds for Northern Ireland, and

  • “appropriate register” means any register under the management and control of the Keeper of the Registers of Scotland.

278Abortive acquisition benefits and expenses

Benefits or expenses are within this section if—

(a)they are benefits provided or expenses incurred with a view to the acquisition of an interest in a residence,

(b)the interest is not acquired—

(i)because of circumstances outside the control of the person seeking to acquire it, or

(ii)because that person reasonably declines to proceed, and

(c)the benefits or expenses would have fallen within section 277 if the interest had been acquired.

279Disposal benefits and expenses

(1)This section applies if the employee has an interest in the former residence and because of the change of residence it is disposed of or is intended to be disposed of.

(2)The following benefits are within this section—

(a)legal services connected with the disposal or intended disposal, including legal services connected with the redemption of a related loan,

(b)the waiving of any penalty for redeeming a related loan for the purpose of the disposal or intended disposal,

(c)the services of an estate agent or auctioneer engaged in the disposal or intended disposal,

(d)services connected with the advertisement of the disposal or intended disposal,

(e)the disconnection, for the purpose of the disposal or intended disposal, of any utility serving the former residence, and

(f)services connected with maintaining, insuring, or preserving the security of, the former residence at any time when it is unoccupied pending the disposal or intended disposal.

(3)The following expenses are within this section—

(a)sums paid for any services within subsection (2)(a), (c), (d) or (e),

(b)any penalty for redeeming a related loan for the purpose of the disposal or intended disposal,

(c)rent paid in respect of the former residence at any time when it is unoccupied pending the disposal or intended disposal, and

(d)expenses of maintaining, insuring, or preserving the security of the former residence at any time when it is unoccupied pending the disposal or intended disposal.

(4)In this section references to the employee having an interest in a residence include—

(a)one or more members of the employee’s family or household having such an interest, or

(b)the employee and one or more members of the employee’s family or household having such an interest.

(5)A loan is a “related loan” for this purpose if—

(a)it was raised to obtain an interest in the former residence, or

(b)it is secured on such an interest, or

(c)part of it was so raised and the rest of it is so secured.

280Transporting belongings

(1)The following benefits are within this section—

(a)the transportation of domestic belongings from the employee’s former residence to the employee’s new residence, and

(b)the effecting of insurance to cover such transportation.

(2)The following expenses are within this section—

(a)expenses connected with such transportation, and

(b)the costs of any such insurance.

(3)In this section—

  • “domestic belongings” means belongings of the employee or of members of the employee’s family or household, and

  • “transportation” includes—

    (a)

    packing and unpacking belongings,

    (b)

    temporarily storing them, where there is not a direct move from the former to the new residence,

    (c)

    detaching domestic fittings from the former residence, where they are to be taken to the new residence, and

    (d)

    attaching domestic fittings to the new residence and adapting them, where they are brought from the former residence.

281Travelling and subsistence

(1)The following benefits are within this section—

(a)subsistence and facilities for travel provided for the employee and members of the employee’s family or household for temporary visits to the new area for purposes connected with the change of residence,

(b)any other subsistence provided for the employee,

(c)facilities provided for the employee for travel between the employee’s former residence and—

(i)the place where the employee’s new duties are normally performed, or

(ii)the new place where the duties of the employee’s employment are normally performed, or

(iii)temporary living accommodation of the employee,

(d)where the employment change is within section 273(2)(b) or (c) (change of duties or place of performance), facilities provided for the employee for travel before the change between the employee’s new residence and—

(i)the place where the employee normally performs the duties of the employment before the change, or

(ii)temporary living accommodation of the employee,

(e)facilities provided for the employee and members of the employee’s family or household for travel from the employee’s former residence to the employee’s new residence in connection with the change of residence,

(f)subsistence provided for a relevant child while the child stays in education-linked living accommodation,

(g)facilities provided for a relevant child for travel between education-linked living accommodation and the employee’s accommodation.

(2)For the purposes of this section, “education-linked living accommodation”, in relation to a relevant child, means living accommodation where the child stays for the purpose of securing continuity in education, being—

(a)accommodation in the new area where the child stays before the employee’s change of residence,

(b)accommodation in the former area where the child stays after that change,

(c)accommodation in the new area where the child stays while the employee is living in temporary living accommodation in the former area, or

(d)accommodation in the former area where the child stays while the employee is living in temporary living accommodation in the new area.

(3)For the purposes of subsection (1)(g) “the employee’s accommodation”, in relation to travel to or from education-linked accommodation, means—

(a)if that accommodation is within subsection (2)(a), the employee’s former residence,

(b)if that accommodation is within subsection (2)(b), the employee’s new residence, and

(c)if that accommodation is within subsection (2)(c) or (d), the employee’s temporary accommodation.

(4)The cost of providing subsistence or travel of a kind described in subsection (1) is an expense within this section.

(5)Subsections (1) and (4) are subject to section 282 (exclusion from this section of benefits and expenses where deduction allowed), and subsection (1) is also subject to section 283 (exclusion from this section of taxable car and van facilities).

(6)In this section—

  • “new duties” means—

    (a)

    if the employment change is within section 273(2)(a) (change of employer), the duties of the employee’s new employment, and

    (b)

    if the employment change is within section 273(2)(b) (change of duties), the new duties of the employment,

  • “former area” means the area round or near the former residence of the employee,

  • “new area” means—

    (a)

    if the employment change is within section 273(2)(a) or (b) (change of employer or duties), the area round or near the place where the employee’s new duties normally are or are to be performed, and

    (b)

    if the employment change is within section 273(2)(c) (change of place of performance), the area round or near the new place where the duties of the employee’s employment normally are or are to be performed,

  • “relevant child” means a person who is a member of the employee’s family or household and is aged under 19 at the beginning of the tax year in which the employment change occurs, and

  • “subsistence” means food, drink and temporary living accommodation.

282Exclusion from section 281 of benefits and expenses where deduction allowed

(1)Benefits and expenses are excluded from section 281 (travelling and subsistence) if or to the extent that an amount is deductible in respect of the cost of the benefits or of the expenses under any of the following provisions.

(2)They are—

(a)section 341 (travel at start or finish of overseas employment),

(b)section 342 (travel between employments where duties performed abroad), and

(c)Chapter 5 of Part 5 except section 376 (deductions for earnings representing benefits or reimbursed expenses in respect of certain foreign travel).

(3)If an amount is so deductible in respect of part only of the cost of a benefit, the part of the benefit excluded by this section is to be determined on a just and reasonable basis.

283Exclusion from section 281 of taxable car and van facilities

(1)A car or van is not treated as a facility for the purposes of section 281(1) if in the tax year in which it is provided it is also made available—

(a)to the employee or members of the employee’s family or household for private use not falling within section 281(1),

(b)by reason of the employee’s employment, and

(c)without any transfer of the property in it.

(2)The following sections apply for the purposes of this section as they apply for the purposes of Chapter 6 of Part 3 (taxable benefits: cars, vans and related benefits)—

(a)section 115 (meaning of “car” and “van”),

(b)section 117 (meaning of car or van made available by reason of employment), and

(c)section 118 (availability for private use).

284Bridging loan expenses

(1)Expenses are within this section if—

(a)the employee has an interest in the former residence and disposes of it because of the change of residence,

(b)the employee acquires an interest in the new residence, and

(c)the expenses are interest payable by the employee in respect of a loan raised by the employee wholly or partly because expenditure is incurred in connection with that acquisition before the proceeds of that disposal become available.

This is subject to subsections (2) and (3).

(2)Interest is only within this section if or to the extent that the loan is used—

(a)for acquiring the employee’s interest in the new residence, or

(b)for redeeming a loan—

(i)which was raised by the employee to obtain an interest in the former residence,

(ii)which is secured on such an interest, or

(iii)which was partly so raised and the rest of which is so secured.

(3)If the loan exceeds the market value of the employee’s interest in the former residence at the time of acquisition of the new residence, the interest on the excess is not within this section.

(4)If subsection (3) applies in a case where the loan is used partly for purposes within subsection (2) and partly for other purposes, the amount of the interest within this section is the appropriate fraction of the total interest.

(5)The appropriate fraction is—

Formula - ML divided by L

or, if it is smaller—

Formula - PL divided by L

where—

  • MV is the market value of the employee’s interest in the former residence at the time of acquisition of the new residence,

  • PL is the part of the loan used for purposes within subsection (2), and

  • L is the amount of the loan.

(6)In this section—

(a)references to a loan raised by the employee include a loan raised by—

(i)one or more members of the employee’s family or household, or

(ii)the employee and one or more members of the employee’s family or household, and

(b)references to the employee having, disposing of or acquiring an interest in a residence include—

(i)one or more members of the employee’s family or household having, disposing of or acquiring such an interest, or

(ii)the employee and one or more members of the employee’s family or household having, disposing of or acquiring such an interest.

285Replacement of domestic goods

(1)Benefits and expenses are within this section if—

(a)the employee has an interest in the former residence and disposes of it because of the change of residence,

(b)the employee acquires an interest in the new residence,

(c)in the case of benefits, they are domestic goods provided to replace goods used at the former residence which are unsuitable for use at the new residence, and

(d)in the case of expenses, they are incurred on the purchase of domestic goods intended for such replacement.

(2)In this section references to the employee having, disposing of or acquiring an interest in a residence include—

(a)one or more members of the employee’s family or household having, disposing of or acquiring such an interest, or

(b)the employee and one or more members of the employee’s family or household having, disposing of or acquiring such an interest.

286Power to amend sections 279 to 285

(1)The Treasury may by regulations amend sections 279 to 285 so as to secure that benefits or expenses which would not otherwise fall within any of those sections do so.

(2)The regulations may include such supplementary, incidental or consequential provisions as appear to the Treasury to be necessary or expedient.

(3)Those provisions may be made by amending this Chapter or otherwise.

(4)The regulations apply to a change of an employee’s residence resulting from an employment change occurring on or after the day specified in the regulations for this purpose.

Limit on exemption

287Limit on exemption

(1)If in the case of any change of residence the value of the exemption exceeds £8,000, section 271 (exemption of removal benefits and expenses) does not apply to the excess.

(2)The value of the exemption is an amount equal to the sum of—

(a)the section 62 earnings, and

(b)the benefits code earnings (after taking account of section 64(2)(b) where otherwise an amount that falls within paragraph (a) would be included).

(3)In this section “the section 62 earnings” means all earnings within section 62 (earnings) in respect of which section 271 would prevent liability to income tax from arising if this section were disregarded.

(4)In this section “the benefits code earnings” means all earnings—

(a)which are treated as such under the benefits code (except earnings so treated under Chapter 7 of Part 3 (taxable benefits: loans)), and

(b)in respect of which section 271 would prevent liability to income tax from arising if this section were disregarded.

(5)In the case of living accommodation, the amount that would be so treated is to be taken to be equal to—

CE - D

where—

  • CE is the cash equivalent of the accommodation under Chapter 5 of Part 3 (taxable benefits: living accommodation) for the period in which the accommodation is provided (calculated as mentioned in section 103), and

  • D is any amount deductible under section 364 (deductions where living accommodation provided).

Special exemption and relief for bridging loans

288Limited exemption of certain bridging loans connected with employment moves

(1)No liability to income tax arises by virtue of Chapter 7 of Part 3 (taxable benefits: loans) in respect of a loan if—

(a)it is a removal benefit (see subsection (2)),

(b)the unused removal benefit exemption condition is met (see subsection (3)), and

(c)the loan is discharged before the end of the exempted loan discharge period (see subsection (4)).

(2)For the purposes of this section and section 289, a loan is a removal benefit if—

(a)it is raised by the employee in connection with a change of residence meeting the conditions in section 273 (conditions applicable to change of residence),

(b)the employee has an interest in the former residence and disposes of it in consequence of the change of residence,

(c)the employee acquires an interest in the new residence,

(d)the loan is raised wholly or partly because expenditure is incurred in connection with that acquisition before the proceeds of that disposal become available, and

(e)the loan is made before the limitation day.

(3)For the purposes of this section and section 289 the unused removal benefit exemption condition is that, in the case of the particular change of residence—

(a)the sum specified in section 287(1) (limit on exemption), exceeds

(b)the amount referred to in section 287(2) (the value of the exemption);

and for those purposes that excess is “the unused exemption”.

(4)In this section and section 289 “the exempted loan discharge period”, in relation to a loan, means the period of N days beginning with the day on which it is made, taking N as the number obtained by applying the following formula and, if that does not give a whole number, rounding up the result to the nearest whole number—

Formula - (A divided by (B multiplied by C)) multiplied by 365

where—

  • A is the unused exemption,

  • B is the maximum amount of the loan outstanding in the period beginning with the time when the loan is made and ending with the limitation day, and

  • C is the official rate of interest in force when the loan is made (expressed as a percentage).

(5)In this section—

(a)references to a loan raised by the employee include a loan raised by—

(i)one or more members of the employee’s family or household, or

(ii)the employee and one or more members of the employee’s family or household, and

(b)references to the employee having, disposing of or acquiring an interest in a residence include—

(i)one or more members of the employee’s family or household having, disposing of or acquiring such an interest, or

(ii)the employee and one or more members of the employee’s family or household having, disposing of or acquiring such an interest.

(6)The tax payable in respect of a loan for a tax year ending before the limitation day may be decided on the basis that the unused removal benefit exemption condition will not be met.

289Relief for certain bridging loans not qualifying for exemption under section 288

(1)This subsection applies to a loan if—

(a)it is a removal benefit (see section 288(2)),

(b)the unused removal benefit exemption condition is met (see section 288(3)), and

(c)the loan is not discharged before the end of the exempted loan discharge period (see section 288(4)).

(2)A loan to which subsection (1) applies is to be treated for the purposes of Chapter 7 of Part 3 (taxable benefits: loans) as if it was made on the day after the last day of the exempted loan discharge period.

(3)Subsection (2) does not apply for the purposes of sections 176, 177, 180, 189 and 190.

(4)The tax payable in respect of a loan for a tax year ending before the limitation day may be decided on the basis that subsections (1) and (2) will not apply because the unused removal benefit exemption condition will not be met.

Chapter 8Exemptions: special kinds of employees

Ministers of religion

290Accommodation benefits of ministers of religion

(1)No liability to income tax in respect of a person employed as a full-time minister arises by virtue of—

(a)the payment or reimbursement of a statutory amount payable in connection with qualifying premises, or

(b)the reimbursement of a statutory deduction made in connection with qualifying premises.

(2)No liability to income tax in respect of a person employed as a full-time minister arises by virtue of the payment or reimbursement of expenses incurred in connection with providing living accommodation in qualifying premises if the employment is excluded employment.

(3)Subsection (1) does not apply if or to the extent that the amount or deduction is properly attributable to a part of the premises for which the minister receives rent.

(4)Premises are qualifying premises in relation to a person employed as a minister if—

(a)an interest in them belongs to a charity or an ecclesiastical corporation, and

(b)because of that interest and by reason of holding the employment, the minister has a residence in them from which to perform the duties of the employment.

(5)In this section—

  • “charity” means a body of persons or trust established for charitable purposes only,

  • “full-time minister” means a person in full-time employment as a minister of a religious denomination,

  • “statutory amount” means an amount paid in pursuance of a provision in, or having the force of, an Act, and

  • “statutory deduction” means a deduction made in pursuance of such a provision.

MPs, government ministers etc.

291Termination payments to MPs and others ceasing to hold office

(1)No liability to income tax in respect of earnings arises by virtue of any grant or payment to which this section applies (but see Chapter 3 of Part 6: payments and benefits on termination of employment etc.).

(2)This section applies to grants and payments—

(a)made in accordance with a resolution of the House of Commons to a person ceasing to be a Member of that House on a dissolution of Parliament,

(b)made under section 4 of the Ministerial and other Pensions and Salaries Act 1991 (c. 5) (grants to persons ceasing to hold certain ministerial and other offices),

(c)made under section 3 of the European Parliament (Pay and Pensions) Act 1979 (c. 50) (resettlement grants for persons ceasing to be Representatives),

(d)made under section 81(3) of the Scotland Act 1998 (c. 46) to a person—

(i)ceasing to be a member of the Scottish Parliament on its dissolution, or

(ii)ceasing to hold an office corresponding to a relevant office,

(e)made under section 18(1) of the Government of Wales Act 1998 (c. 38) to a person ceasing to be a member of the National Assembly for Wales on the expiry of the member’s term of office, or

(f)made under section 48(1) of the Northern Ireland Act 1998 (c. 47) to a person—

(i)ceasing to be a member of the Northern Ireland Assembly on its dissolution, or

(ii)ceasing to hold an office corresponding to a relevant office.

(3)In this section “a relevant office” has the same meaning as in section 4 of the Ministerial and other Pensions and Salaries Act 1991.

292Overnight expenses allowances of MPs

(1)No liability to income tax arises in respect of an overnight expenses allowance paid to a Member of the House of Commons in accordance with a resolution of that House.

(2)“Overnight expenses allowance” means an allowance expressed to be in respect of additional expenses necessarily incurred by the Member in staying overnight away from the Member’s only or main residence, for the purpose of performing parliamentary duties—

(a)in the London area, as defined in such a resolution, or

(b)in the Member’s constituency.

293Overnight expenses of other elected representatives

(1)No liability to income tax arises in respect of a payment to which this section applies if it is expressed to be made in respect of a member’s necessary overnight expenses.

(2)This section applies to payments—

(a)made to members of the Scottish Parliament under section 81(2) of the Scotland Act 1998 (c. 46),

(b)made to members of the National Assembly for Wales under section 16(2) of the Government of Wales Act 1998 (c. 38), or

(c)made to members of the Northern Ireland Assembly under section 47(2) of the Northern Ireland Act 1998 (c. 47).

(3)In this section “a member’s necessary overnight expenses” means additional expenses necessarily incurred by a member for the purpose of performing duties as a member in staying overnight away from the member’s only or main residence—

(a)in the area in which the Parliament or Assembly to which the member belongs sits, or

(b)in the constituency or region which the member represents.

294EU travel expenses of MPs and other representatives

(1)No liability to income tax arises in respect of a sum that is—

(a)paid to a Member of the House of Commons in accordance with a resolution of that House providing for Members of that House to be reimbursed EU travel expenses, or

(b)paid to a member of—

(i)the Scottish Parliament under section 81(2) of the Scotland Act 1998,

(ii)the National Assembly for Wales under section 16(2) of the Government of Wales Act 1998, or

(iii)the Northern Ireland Assembly under section 47(2) of the Northern Ireland Act 1998,

and expressed to be made in respect of EU travel expenses.

(2)“EU travel expenses” means the cost of, and any additional expenses incurred in, travelling between the United Kingdom and—

(a)a European Union institution in Brussels, Luxembourg or Strasbourg, or

(b)the national parliament of another member State or of a candidate country.

(3)In subsection (2) “candidate country” means Bulgaria, Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Romania, the Slovak Republic, Slovenia or Turkey.

(4)The Treasury shall by order make such amendments of the definition in subsection (3) as are necessary to secure that the countries listed are those that are from time to time candidates for membership of the European Union.

295Transport and subsistence for Government ministers etc.

(1)No liability to income tax arises in respect of the provision of transport or subsistence provided or made available by or on behalf of the Crown to—

(a)the holder of a ministerial office, or

(b)a member of the family or household of the holder of a ministerial office.

(2)No liability to income tax arises in respect of payments and reimbursements by or on behalf of the Crown of expenses incurred in connection with the provision of transport or subsistence to a person within subsection (1).

(3)“Ministerial office” means—

(a)an office in Her Majesty’s Government in the United Kingdom,

(b)any other office which is one of the offices and positions in respect of which salaries are payable under section 1 of the Ministerial and other Salaries Act 1975 (c. 27), and

(c)an office under one of the following Acts which corresponds to an office within paragraph (a) or (b)—

(i)the Scotland Act 1998 (c. 46),

(ii)the Government of Wales Act 1998 (c. 38), or

(iii)the Northern Ireland Act 1998 (c. 47).

(4)In determining whether a particular person holds an office within subsection (3)(b), it is irrelevant whether or not a salary is paid or payable to that person under the Ministerial and other Salaries Act 1975.

(5)In this section references to the provision of transport to a person include references to—

(a)the provision or making available to that person of a vehicle with or without a driver,

(b)the provision of fuel for a vehicle provided or made available to that person, and

(c)the provision of any other benefit in connection with such a vehicle.

(6)In this section—

(a)“subsistence” includes food and drink and temporary living accommodation, and

(b)“vehicle” means a mechanically propelled road vehicle.

Armed forces

296Armed forces' leave travel facilities

(1)No liability to income tax arises in respect of—

(a)the provision of travel facilities for a member of the armed forces of the Crown going on or returning from leave, or

(b)a payment made in respect of such travel.

(2)In subsection (1) “travel facilities” does not include a vehicle.

297Armed forces' food, drink and mess allowances

(1)No liability to income tax arises in respect of allowances if—

(a)they are payable out of the public revenue to any description of members of the armed forces of the Crown, and

(b)the Treasury certifies that they are payable to them instead of food or drink normally supplied to members of the armed forces.

(2)No liability to income tax arises in respect of allowances if—

(a)they are payable out of the public revenue in respect of any description of members of the armed forces of the Crown, and

(b)the Treasury certifies that they are so payable as a contribution to the expenses of a mess.

298Reserve and auxiliary forces' training allowances

No liability to income tax arises in respect of the following sums if they are payable out of the public revenue to members of the reserve and auxiliary forces of the Crown—

(a)training expenses allowances, and

(b)bounties payable in consideration of the members undertaking certain training and attaining a particular standard of efficiency.

Crown employees

299Crown employees' foreign service allowances

(1)No liability to income tax arises in respect of an allowance paid to a person in employment under the Crown if it is certified to represent compensation for the extra cost of being obliged to live outside the United Kingdom in order to perform the duties of the employment.

(2)A certificate under subsection (1) may only be given by—

(a)the Treasury,

(b)the Secretary of State,

(c)the Lord Chancellor,

(d)the Chancellor of the Exchequer,

(e)the Minister for the Civil Service,

(f)the Lord President of the Council,

(g)the Lord Privy Seal, or

(h)the Attorney General.

Consuls, foreign agents etc.

300Consuls

(1)No liability to income tax arises in respect of income arising from the office of a consul in the United Kingdom in the service of a foreign state.

(2)Such income is also to be disregarded in estimating the amount of income for any income tax purposes.

(3)In this section “consul” means a person recognised by Her Majesty as being a consul-general, consul, vice-consul or consular agent.

301Official agents

(1)No liability to income tax arises in respect of income arising from employment as an official agent in the United Kingdom for a foreign state if conditions A and B are met.

(2)Condition A is that the employee is neither—

(a)a Commonwealth citizen, nor

(b)a citizen of the Republic of Ireland.

(3)Condition B is that the functions of the employment are not exercised in connection with a trade, business or other undertaking carried on for the purposes of profit.

(4)Such income is also to be disregarded in estimating the amount of income for any income tax purposes.

(5)In this section “official agent” means a person who is not a consul (as defined in section 300) but is employed on the staff of—

(a)a consulate, or

(b)an official department or agency of a foreign state.

(6)Subsection (5)(b) does not apply to a department or agency which carries on a trade, business or other undertaking for the purposes of profit.

302Consular employees

(1)No liability to income tax arises in respect of income arising from employment in the United Kingdom as a consular employee for a foreign state if—

(a)Her Majesty by Order in Council directs that this section applies to the foreign state for the purpose of giving effect to a reciprocal arrangement with that state, and

(b)condition A or B is met.

(2)Condition A is that the employee is a national of the foreign state.

(3)Condition B is that the employee is not a British citizen, a British overseas territories citizen, a British National (Overseas) or a British Overseas citizen.

(4)In this section—

  • “consular employee” includes any person employed for the purposes of the official business of a consular officer at—

    (a)

    any consulate,

    (b)

    any consular establishment, or

    (c)

    any other premises used for those purposes, and

  • “reciprocal arrangement” means a consular convention or other arrangement with a foreign state, making similar provision to that made by this section and section 322 of ICTA in the case of Her Majesty’s consular officers or employees in that state.

(5)An Order in Council under subsection (1) may limit the operation of this section in relation to a state in any way appearing to Her Majesty necessary or expedient having regard to the arrangement with the state.

(6)Such an Order—

(a)may be made so as to have effect from a date earlier than that on which it is made, but not earlier than the arrangement in question comes into force, and

(b)may contain such transitional provisions as appear to Her Majesty necessary or expedient.

(7)A statutory instrument containing such an Order is subject to annulment in pursuance of a resolution of the House of Commons.

(8)This section does not affect section 301 (official agents).

Visiting forces and staff of designated allied headquarters

303Visiting forces and staff of designated allied headquarters

(1)No liability to income tax arises in respect of earnings if—

(a)they are paid by the government of a designated country to a member of a visiting force of that country or of a civilian component of such a force, and

(b)that person is not a British citizen, a British overseas territories citizen, a British National (Overseas) or a British Overseas citizen.

(2)For the purposes of subsection (1)—

(a)members of the armed forces of a designated country who are attached to a designated allied headquarters are treated as a visiting force of that country, and

(b)whether a person is a member of a civilian component of such a force is to be determined accordingly.

(3)No liability to income tax arises in respect of earnings if they are paid by a designated allied headquarters to an employee of a category for the time being agreed between Her Majesty’s government in the United Kingdom and the other members of the North Atlantic Council.

(4)But where the employee is a British citizen, a British overseas territories citizen, a British National (Overseas) or a British Overseas citizen, subsection (3) only applies if it is necessary for it to do so to give effect to an agreement between parties to the North Atlantic Treaty.

(5)Subsections (1) and (2) are to be interpreted as if—

(a)they were in Part 1 of the Visiting Forces Act 1952 (c. 67), and

(b)references in that Act to a country to which a provision of that Act applies were references to a designated country.

(6)In this section—

  • “allied headquarters” means an international military headquarters established under the North Atlantic Treaty, and

  • “designated” means designated for the purpose in question by or under an Order in Council made for giving effect to an international agreement.

Detached national experts

304Experts seconded to European Commission

(1)No liability to income tax arises in respect of daily subsistence allowances paid by the European Commission to persons whose services are made available to the Commission by their employers under the detached national experts scheme.

(2)“The detached national experts scheme” means—

(a)the scheme relating to national experts seconded to the European Commission which was established by the Commission on 26th July 1988, as it has effect for the time being, or

(b)any scheme having effect for the time being which replaces that scheme.

Offshore oil and gas workers

305Offshore oil and gas workers: mainland transfers

(1)No liability to income tax arises in respect of—

(a)the provision for an employee who has a permanent workplace at an offshore installation of—

(i)transfer transport,

(ii)related accommodation and subsistence, or

(iii)local transport, or

(b)the payment or reimbursement of reasonable expenses incurred by such an employee on such transport or accommodation and subsistence.

(2)Subsection (1)(a)(ii) only applies if the related accommodation and subsistence is provided at reasonable cost.

(3)In this section “transfer transport” means transport by sea or air between the mainland of Great Britain or Northern Ireland and the offshore installation, which meets conditions A and B.

(4)Condition A is that the place of arrival or departure on the mainland is one to or from which transport between the mainland and the offshore installation is provided for employees generally.

(5)Condition B is that the cost of the transport would not be deductible under Part 5 if the employee incurred and paid it.

(6)In this section—

  • “related accommodation and subsistence” means overnight accommodation and subsistence in the vicinity of the place of departure or arrival on the mainland, which is necessary because of the time at which transfer transport is to be taken,

  • “local transport” means transport between a place where the employee is provided with related accommodation and subsistence and the place of departure or arrival on the mainland,

  • “offshore installation” means anything falling within section 40(5)(b)(i) or (ii), and

  • “workplace” and “permanent workplace” have the meaning given by section 339.

Miners etc.

306Miners etc: coal and allowances in lieu of coal

(1)No liability to income tax arises in respect of the provision of coal or smokeless fuel or an allowance paid in lieu of such provision if the employee is a colliery worker and the condition in subsection (2) is met.

(2)That condition is that the amount of coal or fuel provided or in respect of which the allowance is paid does not substantially exceed the amount reasonably required for personal use.

(3)That condition is assumed to be met unless the contrary is shown.

(4)In this section “colliery worker” means a coal miner or any other person employed at or about a colliery otherwise than in clerical, administrative or technical work.

Chapter 9Exemptions: pension provision

307Death or retirement benefit provision

(1)No liability to income tax arises by virtue of Chapter 10 of Part 3 (taxable benefits: residual liability to charge) in respect of provision made by an employee’s employer for a retirement or death benefit.

(2)In subsection (1) “retirement or death benefit” means a pension, annuity, lump sum, gratuity or other similar benefit which will be paid or given to the employee or a member of the employee’s family or household in the event of the employee’s retirement or death.

308Exemption of contributions to approved personal pension arrangements

(1)No liability to income tax arises in respect of earnings where an employer makes contributions under approved personal pension arrangements made by an employee.

(2)In this section “approved” and “personal pension arrangements” have the meaning given by section 630(1) of ICTA.

Chapter 10Exemptions: termination of employment

Redundancy payments

309Limited exemptions for statutory redundancy payments

(1)No liability to income tax in respect of earnings arises by virtue of a redundancy payment or an approved contractual payment, except where subsection (2) applies.

(2)Where an approved contractual payment exceeds the amount which would have been due if a redundancy payment had been payable, the excess is liable to income tax.

(3)No liability to income tax in respect of employment income other than earnings arises by virtue of a redundancy payment or an approved contractual payment, except where it does so by virtue of Chapter 3 of Part 6 (payments and benefits on termination of employment etc.).

(4)For the purposes of this section—

(a)a statutory payment in respect of a redundancy payment is to be treated as paid on account of the redundancy payment, and

(b)a statutory payment in respect of an approved contractual payment is to be treated as paid on account of the approved contractual payment.

(5)In this section—

  • “approved contractual payment” means a payment to a person on the termination of the person’s employment under an agreement in respect of which an order is in force under section 157 of ERA 1996 or Article 192 of ER(NI)O 1996,

  • “redundancy payment” means a redundancy payment under Part 11 of ERA 1996 or Part 12 of ER(NI)O 1996, and

  • “statutory payment” means a payment under section 167(1) of ERA 1996 or Article 202(1) of ER(NI)O 1996.

(6)In subsection (5) “employment”, in relation to a person, has the meaning given in section 230(5) of ERA 1996 or Article 3(5) of ER(NI)O 1996.

Outplacement benefits

310Counselling and other outplacement services

(1)No liability to income tax arises in respect of—

(a)the provision of services to a person in connection with the cessation of the person’s employment, or

(b)the payment or reimbursement of—

(i)fees for such provision, or

(ii)travelling expenses incurred in connection with such provision,

if conditions A to D and, in the case of travel expenses, condition E are met.

(2)Condition A is that the only or main purpose of the provision of the services is to enable the person to do either or both of the following—

(a)to adjust to the cessation of the employment, or

(b)to find other gainful employment (including self-employment).

(3)Condition B is that the services consist wholly of any or all of the following—

(a)giving advice and guidance,

(b)imparting or improving skills,

(c)providing or making available the use of office equipment or similar facilities.

(4)Condition C is that the person has been employed full-time in the employment which is ceasing throughout the period of 2 years ending—

(a)at the time when the services begin to be provided, or

(b)if earlier, at the time when the employment ceases.

(5)Condition D is that the opportunity to receive the services, on similar terms as to payment or reimbursement of any expenses incurred in connection with their provision, is available—

(a)generally to employees or former employees of the person’s employer in that employment, or

(b)to a particular class or classes of them.

(6)Condition E is that the travel expenses are expenses—

(a)in respect of which, on the assumptions in subsection (7), mileage allowance relief under Chapter 2 of this Part would be available if no mileage allowance payments had been made, or

(b)which, on those assumptions, would be deductible under Part 5.

(7)The assumptions are—

(a)that receiving the services is one of the duties of the employee’s employment,

(b)that the employee incurs and pays the expenses, and

(c)if the employment has in fact ceased, that it continues.

(8)In this section “mileage allowance payments” has the meaning given by section 229(2).

311Retraining courses

(1)No liability to income tax arises in respect of the payment or reimbursement of retraining course expenses by a person (“the employer”) if the course conditions, the employment conditions and, in the case of travel expenses, the conditions in subsection (5) are met.

(2)In subsection (1) “retraining course expenses” means—

(a)fees for the attendance of another person (“the employee”) at a training course,

(b)travelling expenses incurred in connection with it,

(c)fees for an examination taken during or at the end of it, or

(d)the cost of any books which are essential for a person attending it.

(3)The course conditions are that—

(a)the course provides training designed to impart or improve skills or knowledge relevant to, and intended to be used in the course of, gainful employment (including self-employment) of any description,

(b)it is entirely devoted to the teaching or practical application (or both) of the skills or knowledge,

(c)it lasts no more than one year, and

(d)the employee attends it on a full-time or substantially full-time basis.

(4)The employment conditions are that—

(a)the employee begins the course while employed by the employer or within the period of one year after the employment ceases,

(b)the employee ceases to be employed by the employer before the end of the period of 2 years beginning at the end of the course and is not re-employed by the employer within the period of 2 years after so ceasing,

(c)the employee is employed full-time in the employment which is ceasing throughout the period of 2 years ending—

(i)when the employee begins the course, or

(ii)if earlier, when the employment ceases, and

(d)the opportunity to undertake the course, on similar terms as to payment or reimbursement of amounts within subsection (1), is available—

(i)generally to the employee’s fellow employees or former fellow employees in that employment, or

(ii)to a particular class or classes of them.

(5)The travel expenses must be—

(a)expenses in respect of which, on the assumptions in subsection (6), mileage allowance relief under Chapter 2 of this Part would be available if no mileage allowance payments had been made, or

(b)expenses which, on those assumptions, would be deductible under Part 5.

(6)The assumptions are—

(a)that attendance at the course is one of the duties of the employee’s employment,

(b)that the employee incurs and pays the expenses, and

(c)if the employee has in fact ceased to be employed by the employer, that the employee continues to be employed by the employer.

(7)In this section “mileage allowance payments” has the meaning given by section 229(2).

312Recovery of tax

(1)This section applies if—

(a)a person’s liability to tax for a tax year has been determined on the assumption that section 311(1) applies, and

(b)subsequently—

(i)the condition in section 311(4)(a) is not met because of the person’s failure to begin the course within the period of one year after ceasing to be employed, or

(ii)the condition in section 311(4)(b) is not met because of the person’s continued employment or re-employment.

(2)An assessment of an amount or further amount of tax due as a result of the condition not being met may be made under section 29(1) of TMA 1970.

(3)Such an assessment must be made before the end of the period of 6 years immediately following the end of the tax year in which subsection (1) first applies.

(4)If subsection (1)(b)(i) or (ii) applies, the person’s employer or former employer must give the Inland Revenue a notice containing particulars of the person’s failure to begin the course or continued employment or re-employment within 60 days of coming to know of it.

(5)If the Inland Revenue have reason to believe that a person has failed to give such a notice, they may by notice require the person to provide such information as they may reasonably require for the purposes of this section about—

(a)the failure to begin the course,

(b)the continued employment, or

(c)the re-employment.

(6)A notice under subsection (5) may specify a time (not less than 60 days) within which the required information must be provided.

Chapter 11Miscellaneous exemptions

Living accommodation

313Repairs and alterations to living accommodation

(1)This section applies where living accommodation is provided by reason of a person’s employment.

(2)No liability to income tax arises by virtue of Chapter 10 of Part 3 (taxable benefits: residual liability to charge) in respect of—

(a)alterations and additions to the premises which are of a structural nature, or

(b)landlord’s repairs to the premises.

(3)In this section “landlord’s repairs” means repairs of a kind which are the obligation of the lessor under the covenants implied by section 11(1) of the Landlord and Tenant Act 1985 (c. 70) (lessor’s repairing obligations in short leases) where premises are let under a lease to which that section applies.

314Council tax etc. paid for certain living accommodation

(1)This section applies if living accommodation provided for an employee falls within the exception in one of the following provisions—

  • section 99(1) (accommodation necessary for proper performance of duties),

  • section 99(2) (accommodation provided for better performance of duties), or

  • section 100 (accommodation provided as a result of security threat).

(2)No liability to income tax arises by virtue of—

(a)any payment to, for or on behalf of the employee, or

(b)any reimbursement of any payment by the employee,

in respect of council tax or rates, or water or sewerage charges, in respect of the accommodation.

315Limited exemption for expenses connected with certain living accommodation

(1)This section applies if—

(a)living accommodation is provided for an employee in a tax year, and

(b)conditions A and B are met.

(2)Condition A is that the accommodation falls within the exception in one of the following provisions—

  • section 99(1) (accommodation necessary for proper performance of duties),

  • section 99(2) (accommodation provided for better performance of duties), or

  • section 100 (accommodation provided as a result of security threat).

(3)Condition B is that there is an amount of earnings from the employment in the tax year by virtue of expenditure, or the reimbursement to the employee of expenditure, on—

(a)heating, lighting or cleaning the premises,

(b)repairs to the premises, their maintenance or decoration, or

(c)the provision in the premises of furniture, equipment or other items which are normal for domestic occupation.

(4)If this section applies, no liability to income tax arises in respect of the earnings mentioned in subsection (3) to the extent that they exceed—

where—

  • DA is the number of reckonable days in the tax year (a “reckonable day” being a day on which—

    (a)

    the accommodation is provided, and

    (b)

    the employment is held by the employee),

  • DE is—

    (a)

    the number of days in that year, or

    (b)

    if the employment is held for only part of that year, the number of days in that part,

  • NE is the net amount of the earnings from the employment in the tax year (see subsection (5)),

  • SMG is, where the expenses are incurred by a person other than the employee, so much of any sum made good by the employee to that other person as is properly attributable to the expenses.

(5)To calculate the net amount of the earnings from the employment—

  • Step 1

    Take the earnings from the employment, leaving out of account the expenses in question.

  • Step 2

    Add, in the case of employment by a company, the earnings from any employment by an associated company.

    A company is “associated” with another for this purpose if one has control of the other or both are under the control of the same person.

  • Step 3

    Deduct any deductions allowable under—

    (a)

    section 232 (giving effect to mileage allowance relief) or Part 5 of this Act,

    (b)

    section 592(7), 594 or 619(1)(a) of ICTA, or

    (c)

    section 262 of CAA 2001 (capital allowances to be given effect by treating them as deductions from earnings).

Work accommodation, supplies etc.

316Accommodation, supplies and services used in employment duties

(1)No liability to income tax arises by virtue of Chapter 10 of Part 3 (taxable benefits: residual liability to charge) in respect of the provision for an employee of accommodation, supplies or services used by the employee in performing duties of the employment if conditions A and B are met.

(2)Condition A is that any use of the accommodation, supplies or services for private purposes by the employee or members of the employee’s family or household is not significant.

(3)For this purpose, use “for private purposes” means—

(a)use that is not use in performing the duties of the employee’s employment, and

(b)use that is at the same time both use in performing the duties of an employee’s employment and other use.

(4)Condition B is that where the provision is otherwise than on premises occupied by the person making it—

(a)its sole purpose is to enable the employee to perform the duties of the employee’s employment, and

(b)what is provided is not an excluded benefit.

(5)The following are excluded benefits unless regulations under subsection (6) provide otherwise—

(a)a motor vehicle, boat or aircraft, and

(b)a benefit that involves—

(i)the extension, conversion or alteration of living accommodation, or

(ii)the construction, extension, conversion or alteration of a building or other structure on land adjacent to and enjoyed with such accommodation.

(6)The Treasury may make provision by regulations as to what is an excluded benefit for the purposes of subsection (4)(b).

(7)The regulations may provide that a benefit is an excluded benefit only if such conditions as may be prescribed are met as to the terms on which, and persons to whom, it is provided.

Workplace meals

317Subsidised meals

(1)No liability to income tax arises in respect of the provision for an employee by the employer of free or subsidised meals if—

(a)they are provided in a canteen where meals are provided for the employer’s employees generally or generally to those at a particular location, or

(b)they are provided on the employer’s business premises and conditions A to C are met.

(2)Condition A is that the meals are provided on a reasonable scale.

(3)Condition B is that all the employer’s employees or all of them at a particular location may obtain one or both of the following—

(a)a free or subsidised meal, or

(b)a free or subsidised meal voucher or token.

(4)Condition C is that if the meals are provided in the restaurant or dining room of a hotel or a catering or similar business at a time when meals are being served to the public—

(a)part of the restaurant or dining room is designated for the use of employees only, and

(b)the meals are taken in that part.

(5)In this section “free or subsidised meal voucher or token” means a voucher, ticket, pass or other document or token which—

(a)is intended to enable a person to obtain a meal, and

(b)is provided to the employee free of charge or for less than the cost of the meals to be obtained by it.

(6)In this section “meals” includes light refreshments.

Childcare

318Care for children

(1)No liability to income tax arises by virtue of Chapter 10 of Part 3 (taxable benefits: residual liability to charge) in respect of the provision for an employee of care for a child if conditions A to C are met.

(2)If those conditions are met only as respects part of the provision, no such liability arises in respect of that part.

(3)Condition A is that the child is under 18 and—

(a)is a child of the employee maintained at the employee’s expense,

(b)is resident with the employee, or

(c)is a child in respect of whom the employee has all the rights, duties, powers, responsibilities and authority which by law a parent of a child has in relation to the child and the child’s property.

In paragraph (a) “child” includes stepchild.

(4)Condition B is that—

(a)the premises on which the care is provided are not used wholly or mainly as a private dwelling, and

(b)any applicable registration requirement is met with respect to the premises.

(5)In subsection (4), “registration requirement” means a requirement that a person providing the care is registered under—

(a)section 71 or Part 10A of the Children Act 1989 (c. 41), or

(b)Article 118 of the Children (Northern Ireland) Order 1995 (S.I.1995/755 (N.I. 2)),

with respect to premises.

(6)Condition C is that—

(a)the premises on which the care is provided are made available by the employer alone, or

(b)the care requirements are met.

(7)The care requirements are that—

(a)the care is provided under arrangements made by persons who include the employer,

(b)the premises on which it is provided are made available by one or more of those persons, and

(c)under the arrangements the employer is wholly or partly responsible for financing and managing the provision of the care.

(8)In this section “care” means—

(a)any form of care, and

(b)any form of supervised activity which is not provided primarily for education purposes.

Telephones and computer equipment

319Mobile telephones

(1)No liability to income tax arises by virtue of Chapter 10 of Part 3 (taxable benefits: residual liability to charge) in respect of the provision for an employee or a member of the employee’s family or household of a mobile telephone without any transfer of property in it.

(2)In this section “mobile telephone” means telephone apparatus which—

(a)is not physically connected to a land-line, and

(b)is not a cordless telephone or a telepoint telephone.

(3)For the purposes of subsection (2)—

  • “cordless telephone” means telephone apparatus designed or adapted to provide a wireless extension to a telephone and used only as such an extension to a telephone which is physically connected to a land-line,

  • “telephone apparatus” means wireless telegraphy apparatus designed or adapted for the purpose of transmitting and receiving spoken messages and connected to a public telecommunication system (as defined in section 9(1) of the Telecommunications Act 1984 (c. 12)), and

  • “telepoint telephone” means telephone apparatus used for the purpose of a short-range radio communications service at frequencies between 864 and 868 megahertz (inclusive).

320Limited exemption for computer equipment

(1)No liability to income tax arises by virtue of Chapter 10 of Part 3 (taxable benefits: residual liability to charge) in respect of the provision of computer equipment if conditions A to C are met.

(2)Condition A is that the equipment is made available to the employee or to a member of the employee’s family or household without any transfer of property in it.

(3)Condition B is that the arrangements under which computer equipment is made available to employees of the employer, or to members of their families or households, do not favour directors (see subsection (6)).

(4)Condition C is that the aggregate cash equivalent of the benefit of the provision of such equipment in the tax year does not exceed £500.

(5)If conditions A and B are met, but condition C is not, the employee is only liable to income tax in the tax year by virtue of Chapter 10 of Part 3 on so much of that aggregate cash equivalent as exceeds £500.

(6)The arrangements referred to in condition B are only taken to favour directors if—

(a)the only such arrangements are arrangements under which the employee is required to be a director of a company, or

(b)taking all such arrangements together, the terms on which the equipment is made available are more favourable in some or all cases where the employee is a director than in one or more cases where the employee is not.

(7)In this section—

(a)“computer equipment” includes printers, scanners, modems, discs and other peripheral devices designed to be used by being connected to or inserted in a computer,

(b)“director” has the meaning given by section 67(1),

(c)references to making computer equipment available—

(i)include references to the provision, together with any computer equipment made available, of a right to use computer software, but

(ii)do not include references to the provision of access to, or the use of, any public telecommunication system, and

(d)“public telecommunication system” has the same meaning as in the Telecommunications Act 1984 (see section 9(1)).

Awards and gifts

321Suggestion awards

(1)This section applies where an employer establishes a scheme for the making of suggestions that is open on the same terms—

(a)to employees of the employer generally, or

(b)to a particular description of them.

(2)No liability to income tax arises in respect of an encouragement award or financial benefit award made under the scheme for a suggestion which meets conditions A to C if, or to the extent that, it does not exceed the permitted maximum for the award under section 322.

(3)Condition A is that the suggestion relates to the activities carried on by the employer.

(4)Condition B is that the suggestion is made by an employee who could not reasonably be expected to make it in the course of the duties of the employment, having regard to the employee’s experience.

(5)Condition C is that the suggestion is not made at a meeting held for the purpose of proposing suggestions.

(6)In this section and section 322—

  • “encouragement award” means an award, other than a financial benefit award, made for a suggestion with intrinsic merit or showing special effort, and

  • “financial benefit award” means an award for a suggestion relating to an improvement in efficiency or effectiveness which the employer has decided to adopt and reasonably expects will result in a financial benefit.

322Suggestion awards: “the permitted maximum”

(1)The permitted maximum for an encouragement award for the purposes of section 321 (suggestion awards) is £25.

(2)The permitted maximum for a financial benefit award where no such award for the suggestion has been made before is—

(a)if only one such award is made for the suggestion, the suggestion maximum, and

(b)if two or more such awards are made on the same occasion to different persons for the suggestion, the appropriate proportion of the suggestion maximum.

(3)If on a later occasion or occasions one or more further such awards are made for the same suggestion, the permitted maximum for each is—

(a)if only one such award is made for the suggestion on that occasion, the residue of the suggestion maximum, and

(b)if two or more such awards are made on the same occasion to different persons for the suggestion, the appropriate proportion of that residue.

(4)The suggestion maximum for a financial benefit award is the financial benefit share or £5000 if that is less.

(5)In subsection (4) “the financial benefit share” means the greater of—

(a)half the financial benefit reasonably expected to result from the adoption of the suggestion for the first year after its adoption, and

(b)one-tenth of the financial benefit reasonably expected to result from its adoption for the first 5 years after its adoption.

(6)In this section—

  • “the appropriate proportion” means such proportion as the award bears to the total of the financial benefit awards made on the same occasion for the suggestion,

  • “the residue of the suggestion maximum” means the suggestion maximum less the total previous exemption, and

  • “the total previous exemption” means the total of the amounts exempted from income tax under section 321 in respect of financial benefit awards for the suggestion made on previous occasions.

323Long service awards

(1)No liability to income tax arises in respect of a long service award which meets the condition in subsection (3) if or to the extent that the chargeable amount does not exceed the permitted maximum.

(2)In subsection (1)—

  • “chargeable amount” means the amount of employment income which would be charged to tax in respect of the award apart from subsection (1),

  • “long service award” means an award made to an employee to mark not less than 20 years' service with the same employer, and

  • “permitted maximum” means £20 for each year of service in respect of which the award is made.

(3)The condition is that the award must take the form of—

(a)tangible moveable property,

(b)shares in a company which is, or belongs to the same group as, the employer, or

(c)the provision of any other benefit except—

(i)a payment,

(ii)a cash voucher,

(iii)a credit-token,

(iv)securities,

(v)shares not within paragraph (b), or

(vi)an interest in or rights over securities or shares.

(4)Subsection (1) does not apply to an award (“the later award”) if another award to mark a particular period of service with the same employer has been made to the employee in the period of 10 years ending with the date on which the later award is made.

(5)For the purposes of this section, service is treated as being with the same employer if it is with two or more employers—

(a)each of whom is a successor or predecessor of the others, or

(b)one of whom is a company which belongs or has belonged to the same group as the others or a predecessor or successor of the others.

(6)In this section “group” means a body corporate and its 51% subsidiaries.

324Small gifts from third parties

(1)No liability to income tax arises in respect of a gift provided for an employee or a member of the employee’s family or household if conditions A to E are met.

(2)Condition A is that the gift is not provided by the employer or a person connected with the employer.

(3)Condition B is that neither the employer nor a person connected with the employer has directly or indirectly procured the gift.

(4)Condition C is that the gift is not made in recognition of particular services performed by the employee in the course of the employment or in anticipation of such services.

(5)Condition D is that the gift is not cash or securities or the use of a service.

(6)Condition E is that the total cost to the donor of all the eligible gifts in respect of the employee in question during the tax year does not exceed £150.

(7)For the purposes of condition E, the total cost to the donor includes any value added tax payable on the supply of the gifts to the donor, whether or not the donor is entitled to a credit or repayment in respect of that tax.

(8)In this section “eligible gifts” means all gifts which—

(a)meet conditions A to D, or