Income Tax (Earnings and Pensions) Act 2003
This Act imposes charges to income tax on—
employment income (see Parts 2 to 7),
pension income (see Part 9), and
social security income (see Part 10).
Those charges to tax have effect for the purposes of section 1(1) of ICTA (the general charge to income tax).
This Act also—
confers certain reliefs in respect of liabilities of former employees (see Part 8),
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
allows deductions to be made from such income in respect of payroll giving (see Part 12).
Schedule 1 (abbreviations and defined expressions) applies for the purposes of this Act.
In Schedule 1—
Part 1 gives the meaning of the abbreviated references to Acts and instruments used in this Act, and
Part 2 lists the places where expressions used in this Act are defined or otherwise explained.
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.
The structure of the employment income Parts is as follows— this Part imposes the charge to tax on employment income, and sets out— how the amount charged to tax for a tax year is to be calculated, and 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.
In this Act “the employment income Parts” means this Part and Parts 3 to 7.
In the employment income Parts “employment” includes in particular—
any employment under a contract of service,
any employment under a contract of apprenticeship, and
any employment in the service of the Crown.
In those Parts “employed”, “employee” and “employer” have corresponding meanings.
The provisions of the employment income Parts that are expressed to apply to employments apply equally to offices, unless otherwise indicated.
In those provisions as they apply to an office—
references to being employed are to being the holder of the office;
“employee” means the office-holder;
“employer” means the person under whom the office-holder holds office.
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.
The charge to tax on employment income under this Part is a charge to tax on—
general earnings, and
specific employment income. The meaning of “employment income”, “general earnings” and “specific employment income” is given in section 7.
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.
The rules in Chapters 4 and 5 of this Part, which are concerned with— apply for the purposes of the charge to tax on general earnings but not that on specific employment income.
the residence and domicile of an employee in a tax year, and
the tax year in which amounts are received or remitted to the United Kingdom,
The person who is liable for any tax charged on employment income is set out in section 13.
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).
This section gives the meaning for the purposes of the Tax Acts of “employment income”, “general earnings” and “specific employment income”.
“Employment income” means—
earnings within Chapter 1 of Part 3,
any amount treated as earnings (see subsection (5)), or
any amount which counts as employment income (see subsection (6)).
“General earnings” means— excluding in each case any exempt income.
earnings within Chapter 1 of Part 3, or
any amount treated as earnings (see subsection (5)),
“Specific employment income” means any amount which counts as employment income (see subsection (6)), excluding any exempt income.
Subsection (2)(b) or (3)(b) refers to any amount treated as earnings under—
Chapters 7 and 8 of this Part (application of provisions to agency workers and workers under arrangements made by intermediaries),
Chapters 2 to 11 of Part 3 (the benefits code),
Chapter 12 of Part 3 (payments treated as earnings), or
section 262 of CAA 2001 (balancing charges to be given effect by treating them as earnings).
Subsection (2)(c) or (4) refers to any amount which counts as employment income by virtue of—
Part 6 (income which is not earnings or share-related),
Part 7 (share-related income and exemptions), or
any other enactment.
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.
The amount of employment income which is charged to tax under this Part for a particular tax year is as follows.
In the case of general earnings, the amount charged is the net taxable earnings from an employment in the year.
That amount is calculated under section 11 by reference to any taxable earnings from the employment in the year (see section 10(2)).
In the case of specific employment income, the amount charged is the net taxable specific income from an employment for the year.
That amount is calculated under section 12 by reference to any taxable specific income from the employment for the year (see section 10(3)).
Accordingly, no amount of employment income is charged to tax under this Part for a particular tax year unless—
in the case of general earnings, they are taxable earnings from an employment in that year, or
in the case of specific employment income, it is taxable specific income from an employment for that year.
This section explains what is meant by “taxable earnings” and “taxable specific income” in the employment income Parts.
“Taxable earnings” from an employment in a tax year are to be determined in accordance with—
Chapter 4 of this Part (rules applying to employees resident, ordinarily resident and domiciled in the UK), or
Chapter 5 of this Part (rules applying to employees resident, ordinarily resident or domiciled outside the UK).
“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.
For the purposes of this Part the “net taxable earnings” from an employment in a tax year are given by the formula— 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).
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.
Relief may be available under section 380(1) of ICTA (set-off against general income)—
where TE is negative, or
in certain exceptional cases where the amount calculated under subsection (1) is negative.
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.
For the purposes of this Part the “net taxable specific income” from an employment for a tax year is given by the formula— 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).
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.
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.
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).
If the tax is on general earnings, “the taxable person” is the person to whose employment the earnings relate.
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.
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.
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.
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.
In this Chapter—
sections 16 and 17 deal with the year for which general earnings are earned, and
sections 18 and 19 deal with the time when general earnings are received.
In the employment income Parts any reference to the charging provisions of this Chapter is a reference to section 15.
This section applies to general earnings for a tax year in which the employee is resident, ordinarily resident and domiciled in the United Kingdom.
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.
Subsection (2) applies—
whether the earnings are for that year or for some other tax year, and
whether or not the employment is held at the time when the earnings are received.
This section applies for determining whether general earnings are general earnings “for” a particular tax year for the purposes of this Chapter.
General earnings that are earned in, or otherwise in respect of, a particular period are to be regarded as general earnings for that period.
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.
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.
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.
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.
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.
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.
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).
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— 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); if the amount of the earnings for a period is determined by the end of the period, the time when the period ends; 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.
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.
In this section “director” means— and includes any person in accordance with whose directions or instructions the directors of the company (as defined above) are accustomed to act.
in relation to a company whose affairs are managed by a board of directors or similar body, a member of that body,
in relation to a company whose affairs are managed by a single director or similar person, that director or person, and
in relation to a company whose affairs are managed by the members themselves, a member of the company,
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.
Where this section applies— 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.
to a payment on account of general earnings, or
to sums on account of general earnings,
General earnings not consisting of money are to be treated for the purposes of this Chapter as received at the following times.
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).
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.
If subsection (2) or (3) does not apply, the earnings are to be treated as received at the time when the benefit is provided.
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—
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 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 27 (UK-based earnings for year when employee not resident in UK).
In this Chapter—
sections 29 and 30 deal with the year for which general earnings are earned,
sections 31 to 34 deal with the time when general earnings are received or remitted,
sections 35 to 37 deal with relief for delayed remittances, and
sections 38 to 41 deal with the place where the duties of an employment are performed.
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).
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.
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.
Subsection (2) applies—
whether the earnings are for that year or for some other tax year, and
whether or not the employment is held at the time when the earnings are received.
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.
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.
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.
Subsection (2) applies— but that subsection has effect subject to any relief given under section 35 (delayed remittances: claim for relief).
whether the earnings are for that year or for some other tax year, and
whether or not the employment is held at the time when the earnings are remitted;
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).
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—
cannot then be deducted under section 11 from those taxable earnings, but
may be deducted under that section from any taxable earnings under section 21.
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.
General earnings for a tax year are “overseas earnings” for that year if—
in that year the employee is resident and ordinarily resident, but not domiciled, in the United Kingdom,
the employment is with a foreign employer, and
the duties of the employment are performed wholly outside the United Kingdom.
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— section 232 or Part 5 (deductions allowed from earnings), 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 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.
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—
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
the duties of the associated employments are not performed wholly outside the United Kingdom.
The limit is the proportion of the aggregate earnings for that year from all the employments concerned that is reasonable having regard to—
the nature of and time devoted to each of the following—
the duties performed outside the United Kingdom, and
those performed in the United Kingdom, and
all other relevant circumstances.
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).
In this section—
“the employments concerned” means the relevant employment and the associated employments;
“associated employments” means employments with the same employer or with associated employers.
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.
In subsection (5)—
in rules A and B “control” has the meaning given by section 840 of ICTA (in accordance with section 719 of this Act), and
in rule C “control” means control within the meaning of section 416 of ICTA (meaning of expressions relating to close companies).
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).
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—
general earnings in respect of duties performed in the United Kingdom, or
general earnings from overseas Crown employment subject to United Kingdom tax.
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.
Subsection (2) applies—
whether the earnings are for that year or for some other tax year, and
whether or not the employment is held at the time when the earnings are received.
Section 28 explains what is meant by “general earnings from overseas Crown employment subject to United Kingdom tax”.
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—
general earnings in respect of duties performed in the United Kingdom, nor
general earnings from overseas Crown employment subject to United Kingdom tax.
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.
Subsection (2) applies— but that subsection has effect subject to any relief given under section 35 (delayed remittances: claim for relief).
whether the earnings are for that year or for some other tax year, and
whether or not the employment is held at the time when the earnings are remitted;
Section 28 explains what is meant by “general earnings from overseas Crown employment subject to United Kingdom tax”.
This section applies to general earnings for a tax year in which the employee is not resident in the United Kingdom if they are—
general earnings in respect of duties performed in the United Kingdom, or
general earnings from overseas Crown employment subject to United Kingdom tax.
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.
Subsection (2) applies—
whether the earnings are for that year or for some other tax year, and
whether or not the employment is held at the time when the earnings are received.
Section 28 explains what is meant by “general earnings from overseas Crown employment subject to United Kingdom tax”.
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”.
“Crown employment” means employment under the Crown—
which is of a public nature, and
the earnings from which are payable out of the public revenue of the United Kingdom or of Northern Ireland.
“General earnings from overseas Crown employment” means general earnings from such employment in respect of duties performed outside the United Kingdom.
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).
The Board of Inland Revenue may make an order excepting from the operation of sections 25(2) and 27(2)—
general earnings of any description of employee specified in the order;
general earnings from any description of employment so specified.
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.
An order may make provision by reference to all or any of the following—
the residence or nationality of the employee;
whether the employee was engaged in or outside the United Kingdom;
the nature of the post, the rate of remuneration and any other terms and conditions applying to it.
Subsection (7) does not affect the generality of the power to make provision by reference to such factors as the Board consider appropriate.
This section applies for determining whether general earnings are general earnings “for” a particular tax year for the purposes of this Chapter.
General earnings that are earned in, or otherwise in respect of, a particular period are to be regarded as general earnings for that period.
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.
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.
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.
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.
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.
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.
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).
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— 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); if the amount of the earnings for a period is determined by the end of the period, the time when the period ends; 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.
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.
In this section “director” means— and includes any person in accordance with whose directions or instructions the directors of the company (as defined above) are accustomed to act.
in relation to a company whose affairs are managed by a board of directors or similar body, a member of that body,
in relation to a company whose affairs are managed by a single director or similar person, that director or person, and
in relation to a company whose affairs are managed by the members themselves, a member of the company,
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.
Where this section applies— 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.
to a payment on account of general earnings, or
to sums on account of general earnings,
General earnings not consisting of money are to be treated for the purposes of this Chapter as received at the following times.
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).
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.
If subsection (2) or (3) does not apply, the earnings are to be treated as received at the time when the benefit is provided.
This section explains what is meant for the purposes of this Chapter by general earnings being remitted to the United Kingdom.
If general earnings are— 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).
paid, used, or enjoyed in the United Kingdom, or
transmitted or brought to the United Kingdom in any manner or form,
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).
In subsection (3) “UK-linked” debt, in relation to an employee, means—
a debt for money lent to the employee in the United Kingdom, or for interest on money so lent, or
a debt for money lent to the employee outside the United Kingdom and received in the United Kingdom, or
a debt incurred for satisfying—
a debt falling within paragraph (a) or (b), or
another debt falling within this paragraph.
In the case of a debt (within subsection (4)(b) or (c)) for money lent to the employee outside the United Kingdom—
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
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)).
In subsections (4) and (5) any reference to money lent being received in the United Kingdom includes a reference to its being brought there.
Section 34 (further provisions about UK-linked debts) applies for the purposes of subsections (3) to (5).
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.
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.
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).
Condition B is that under an arrangement between the borrower and the lender— 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).
the amount for the time being owed by the borrower to the lender, or
the time at which the debt is to be wholly or partly repaid,
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.
In this section “lender” includes, in relation to any money lent, any person for the time being entitled to repayment.
In this section and section 33 “satisfy”, in relation to a debt, means satisfy wholly or in part.
A person may make a claim for relief under this section for a tax year in respect of delayed remittances from an employment.
“Delayed remittances” are general earnings of the person which—
were received in a country or territory outside the United Kingdom before the tax year for which relief is claimed,
were not remitted to the United Kingdom until that tax year,
could not have been transferred by the person to the United Kingdom before that tax year because of—
the laws of the country or territory where they were received,
executive action of its government, or
the impossibility of obtaining there currency (other than the currency of that country or territory) that could be transferred to the United Kingdom, and
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).
If a person claims relief for a tax year in respect of delayed remittances from an employment, the amount of the remittances—
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
is instead to constitute taxable earnings from the employment under that provision in one or more earlier tax years in accordance with—
subsection (4), or
alternatively, section 36 where an election is made under that section.
Where this subsection applies—
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
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.
This section applies if—
a person (“the claimant”) claims relief under section 35 for a tax year in respect of delayed remittances from an employment, and
at the end of that year the claimant had blocked earnings from that employment for one or more previous tax years.
General earnings are “blocked earnings” for a tax year if they—
were received in a country or territory outside the United Kingdom in that year,
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
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.
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.
A claimant may only specify a particular tax year if—
there were blocked earnings of the claimant for that year from the employment, and
it is a year prior to the tax year for which relief is claimed.
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.
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— 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.
An election under this section—
must be made as part of the claim under section 35, and
is irrevocable.
A person’s personal representatives may make any election under this section which the person might have made.
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.
All adjustments (by way of repayment of tax, assessment or otherwise) are to be made which are necessary to give effect to section 35.
Those adjustments may be made at any time, despite anything to the contrary in the Income Tax Acts.
A person’s personal representatives may make any claim under section 35 which the person might have made.
If a person dies—
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
the person’s personal representatives are liable for any additional tax which arises because of a claim under that section.
Where subsection (5)(b) applies, the additional tax—
is to be assessed on the personal representatives, and
is a debt due from and payable out of the estate.
This section applies if a person ordinarily performs the whole or part of the duties of an employment in the United Kingdom.
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.
This section applies if in a tax year an employment is in substance one whose duties fall to be performed outside the United Kingdom.
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.
This section does not affect any question as to— for the purposes of section 378 (deduction from seafarers' earnings: eligibility), and section 383 (place of performance of incidental duties) applies instead.
where any duties are performed, or
whether a person is absent from the United Kingdom,
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.
Duties which a person resident in the United Kingdom performs on a vessel or aircraft engaged— are to be treated as performed in the United Kingdom for the purposes of this Chapter.
on a voyage or journey beginning or ending in the United Kingdom, or
on a part beginning or ending in the United Kingdom of any other voyage or journey,
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—
the employment is as a seafarer, and
the duties are performed on a ship.
Instead, any duties of the employment which are performed on a ship engaged— are to be treated as performed outside the United Kingdom for the purposes of section 24(1)(b).
on a voyage beginning or ending outside the United Kingdom (but excluding any part of it beginning and ending there), or
on a part beginning or ending outside the United Kingdom of any other voyage,
For the purposes of subsections (3) and (4)—
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;
“ship” does not include—
any offshore installation within the meaning of the Mineral Workings (Offshore Installations) Act 1971 (c. 61), or
what would be such an installation if the references in that Act to controlled waters were to any waters;
the areas designated under section 1(7) of the Continental Shelf Act 1964 (c. 29) are treated as part of the United Kingdom.
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.
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.
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.
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.
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).
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.
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.
This section applies if—
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”),
the services are supplied by or through a third person (“the agency”) under the terms of an agency contract,
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
remuneration receivable under or in consequence of the agency contract does not constitute employment income of the worker apart from this Chapter.
If this section applies—
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
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.
If— any remuneration receivable under or in consequence of the arrangements is to be treated for income tax purposes as earnings from that employment.
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
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,
Section 44 also applies—
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;
if the agency in question is an unincorporated body of which the worker is a member.
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.
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.
In this Chapter “excluded services” means—
services as an actor, singer, musician or other entertainer or as a fashion, photographic or artist’s model, or
services provided wholly—
in the worker’s own home, or
at other premises which are neither controlled or managed by the client nor prescribed by the nature of the services.
For the purposes of this Chapter “remuneration”—
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
subject to paragraph (a), includes every form of payment, gratuity, profit and benefit.
This Chapter has effect with respect to the provision of services through an intermediary.
Nothing in this Chapter—
affects the operation of Chapter 7 of this Part, or
applies to payments subject to deduction of tax under section 555 of ICTA (payments to non-resident entertainers and sportsmen).
This Chapter applies where—
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”),
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
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.
In subsection (1)(a) “business” includes any activity carried on—
by a government or public or local authority (in the United Kingdom or elsewhere), or
by a body corporate, unincorporated body or partnership.
The reference in subsection (1)(b) to a “third party” includes a partnership or unincorporated body of which the worker is a member.
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.
In this Chapter “engagement to which this Chapter applies” means any such provision of services as is mentioned in subsection (1).
If, in the case of an engagement to which this Chapter applies, in any tax year—
the conditions specified in section 51, 52 or 53 are met in relation to the intermediary, and
the worker, or an associate of the worker— 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”).
receives from the intermediary, directly or indirectly, a payment or benefit that is not employment income, or
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,
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.
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).
In this Chapter “the relevant engagements”, in relation to a deemed employment payment, means the engagements mentioned in subsection (2).
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—
the worker has a material interest in the intermediary, or
the payment or benefit mentioned in section 50(1)(b)—
is received or receivable by the worker directly from the intermediary, and
can reasonably be taken to represent remuneration for services provided by the worker to the client.
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—
of the worker, or
of the worker and other persons.
A worker is treated as having a material interest in a company if— has a material interest in the company.
the worker, alone or with one or more associates of the worker, or
an associate of the worker, with or without other such associates,
For this purpose a material interest means—
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
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
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.
In subsection (4)(c) “participator” has the meaning given by section 417(1) of ICTA.
Where the intermediary is a partnership the conditions are as follows.
In relation to any payment or benefit received or receivable by the worker as a member of the partnership the conditions are—
that the worker, alone or with one or more relatives, is entitled to 60% or more of the profits of the partnership; or
that most of the profits of the partnership concerned derive from the provision of services under engagements to which this Chapter applies—
to a single client, or
to a single client together with associates of that client; or
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.
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—
is received or receivable by the worker directly from the intermediary, and
can reasonably be taken to represent remuneration for services provided by the worker to the client.
Where the intermediary is an individual the conditions are that the payment or benefit—
is received or receivable by the worker directly from the intermediary, and
can reasonably be taken to represent remuneration for services provided by the worker to the client.
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— are not chargeable to income tax as employment income, and 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— the worker had been employed by the client, and 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— in respect of which the worker is chargeable to income tax as employment income, and 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.
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.
In step 3 of subsection (1), the reference to expenses met by the intermediary includes—
expenses met by the worker and reimbursed by the intermediary, and
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.
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—
the worker had been employed by the client, and
the vehicle had not been a company vehicle (within the meaning of Chapter 2 of Part 4).
A vehicle falls within this subsection if—
it is provided by the intermediary for the worker, or
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.
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.
In step 7 of subsection (1), the amounts deductible include any payments received in the year from the intermediary that—
are exempt from income tax by virtue of section 229 or 233 (mileage allowance payments and passenger payments), and
do not represent items in respect of which a deduction was made under step 3.
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—
to the services of more than one worker, or
partly to the services of the worker and partly to other matters.
The following provisions apply in relation to the calculation of the deemed employment payment.
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.
The amount of a payment or benefit is taken to be—
in the case of a payment or cash benefit, the amount received, and
in the case of a non-cash benefit, the cash equivalent of the benefit.
The cash equivalent of a non-cash benefit is taken to be—
the amount that would be earnings if the benefit were earnings from an employment, or
in the case of living accommodation, whichever is the greater of that amount and the cash equivalent determined in accordance with section 398(2).
A payment or benefit is treated as received—
in the case of a payment or cash benefit, when payment is made of or on account of the payment or benefit;
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;
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—
the worker had been an employee, and
the benefit had been provided by reason of the employment.
The Income Tax Acts (in particular, the PAYE provisions) apply in relation to the deemed employment payment as follows.
They apply as if—
the worker were employed by the intermediary, and
the relevant engagements were undertaken by the worker in the course of performing the duties of that employment.
The deemed employment payment is treated in particular—
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
as taxable earnings from the employment for the purposes of section 232.
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—
the client employed the worker,
the worker performed the services in the course of that employment, and
the deemed employment payment were a payment by the client of earnings from that employment.
The factors are—
the worker being resident, ordinarily resident or domiciled outside the United Kingdom,
the client being resident or ordinarily resident outside the United Kingdom, and
the services in question being provided outside the United Kingdom.
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.
Where— the intermediary is treated as having a place of business in the United Kingdom, whether or not it in fact does so.
the worker is resident in the United Kingdom,
the services in question are provided in the United Kingdom, and
the client or employer carries on business in the United Kingdom,
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).
If in any tax year— 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.
a deemed employment payment is treated as made, and
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,
Where the intermediary is a company the following are relevant events—
the company ceasing to trade;
where the worker is a member of the company, the worker ceasing to be such a member;
where the worker holds an office with the company, the worker ceasing to hold such an office;
where the worker is employed by the company, the worker ceasing to be so employed.
Where the intermediary is a partnership the following are relevant events—
the dissolution of the partnership or the partnership ceasing to trade or a partner ceasing to act as such;
where the worker is employed by the partnership, the worker ceasing to be so employed.
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.
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.
A claim for relief may be made under this section where the intermediary—
is a company,
is treated as making a deemed employment payment in any tax year, and
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”).
A claim for relief under this section must be made—
by the intermediary by notice to the Inland Revenue, and
within 5 years after the 31st January following the tax year in which the distribution is made.
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.
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.
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—
against relevant distributions of the same tax year before those of other years,
against relevant distributions received by the worker before those received by another person, and
against relevant distributions of earlier years before those of later years.
Where the amount of a relevant distribution is reduced under this section, the amount of any associated tax credit is reduced accordingly.
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.
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—
in respect of that engagement, or
in respect of that engagement together with other engagements.
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).
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.
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.
Except as provided by subsections (2) to (5), the provisions of this Chapter apply separately in relation to each relevant intermediary.
In this section “relevant intermediary” means an intermediary in relation to which the conditions specified in section 51, 52 or 53 are met.
In this Chapter “associate”—
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;
in relation to a company, means a person connected with the company; and
in relation to a partnership, means any associate of a member of the partnership.
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.
The exception is where— 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.
the individual, either alone or with any one or more associates of the individual, or
any associate of the individual, with or without other such associates,
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.
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).
In this section “employee benefit trust” has the meaning given by sections 550 and 551.
In this Chapter—
“associated company” has the meaning given by section 416 of ICTA;
a vehicle of a type not commonly used as a private vehicle and unsuitable to be so used;
“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;
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.
For the purposes of this Chapter—
anything done by or in relation to an associate of an intermediary is treated as done by or in relation to the intermediary, and
a payment or other benefit provided to a member of an individual’s family or household is treated as provided to the individual.
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.
This section explains what is meant by “earnings” in the employment income Parts.
In those Parts “earnings”, in relation to an employment, means—
any salary, wages or fee,
any gratuity or other profit or incidental benefit of any kind obtained by the employee if it is money or money’s worth, or
anything else that constitutes an emolument of the employment.
For the purposes of subsection (2) “money’s worth” means something that is—
of direct monetary value to the employee, or
capable of being converted into money or something of direct monetary value to the employee.
Subsection (1) does not affect the operation of statutory provisions that provide for amounts to be treated as earnings (and see section 721(7)).
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).
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).
Section 216(5) and (6) explain and restrict the effect of section 216(1).
In the benefits code “excluded employment” means an employment to which the exclusion in section 216(1) applies.
This section applies if, apart from this section, the same benefit would give rise to two amounts (“A” and “B”)—
A being an amount of earnings as defined in Chapter 1 of this Part, and
B being an amount to be treated as earnings under the benefits code.
In such a case—
A constitutes earnings as defined in Chapter 1 of this Part, and
the amount (if any) by which B exceeds A is to be treated as earnings under the benefits code.
This section does not apply in connection with living accommodation to which Chapter 5 of this Part applies.
In that case section 109 applies to determine the relationship between that Chapter and Chapter 1 of this Part.
This section does not apply if section 193 (notional loan where acquisition of shares made for less than market value) applies.
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.
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— whether they are employees of P or some other person.
payments of a particular character are made to or for any employees, or
benefits or facilities of a particular kind are provided for any employees,
The “listed provisions” are the provisions listed in section 216(4) (provisions of the benefits code which do not apply to lower-paid employments).
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.
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.
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.
If in their opinion there is reason to do so, the Inland Revenue may revoke a dispensation by giving a further notice to P.
That notice may revoke the dispensation from—
the date when the dispensation was given, or
a later date specified in the notice.
If the notice revokes the dispensation from the date when the dispensation was given—
any liability to tax that would have arisen if the dispensation had never been given is to be treated as having arisen, and
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.
If the notice revokes the dispensation from a later date—
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
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.
In the benefits code—
“employment” means a taxable employment under Part 2, and
“employed”, “employee” and “employer” have corresponding meanings.
Where a Chapter of the benefits code applies in relation to an employee—
references in that Chapter to “the employment” are to the employment of that employee, and
references in that Chapter to “the employer” are to the employer in respect of that employment.
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.
In subsection (3)—
the reference to an employment includes employment as a director of a company, and
“earnings” means earnings as defined in Chapter 1 of this Part.
In the benefits code “director” means— and includes any person in accordance with whose directions or instructions the directors of the company (as defined above) are accustomed to act.
in relation to a company whose affairs are managed by a board of directors or similar body, a member of that body,
in relation to a company whose affairs are managed by a single director or similar person, that director or person, and
in relation to a company whose affairs are managed by the members themselves, a member of the company,
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.
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.
For the purposes of the benefits code a person has a material interest in a company if condition A or B is met.
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— more than 5% of the ordinary share capital of the company.
the beneficial owner of, or
able to control, directly or through the medium of other companies or by any other indirect means,
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— give an entitlement to receive more than 5% of the assets which would then be available for distribution among the participators.
in the event of the winding-up of the company, or
in any other circumstances,
In this section—
an invalid carriage, or
“participator” has the meaning given by section 417(1) of ICTA.
For the purposes of this section a person (“A”) is a relative of another (“B”) if A is—
B’s spouse,
a parent, child or remoter relation in the direct line either of B or of B’s spouse,
a brother or sister of B or of B’s spouse, or
the spouse of a person falling within paragraph (b) or (c).
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.
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.
This Chapter applies to a sum paid to an employee in a tax year if the sum—
is paid to the employee in respect of expenses, and
is so paid by reason of the employment.
This Chapter applies to a sum paid away by an employee in a tax year if the sum—
was put at the employee’s disposal in respect of expenses,
was so put by reason of the employment, and
is paid away by the employee in respect of expenses.
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.
References in this Chapter to an employee accordingly include a prospective or former employee.
This Chapter does not apply to the extent that the sum constitutes earnings from the employment by virtue of any other provision.
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—
the employer is an individual, and
the payment is made in the normal course of the employer’s domestic, family or personal relationships.
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—
the employer is an individual, and
the sum is put at the employee’s disposal in the normal course of the employer’s domestic, family or personal relationships.
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.
Subsection (1) does not prevent the making of a deduction allowed under any of the provisions listed in subsection (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).
This Chapter applies to a cash voucher provided for an employee by reason of the employment which is received by the employee.
A cash voucher provided for an employee by the employer is to be regarded as provided by reason of the employment unless—
the employer is an individual, and
the provision is made in the normal course of the employer’s domestic, family or personal relationships.
A cash voucher provided for an employee and appropriated to the employee— is to be treated for the purposes of this Chapter as having been received by the employee at the time when it is appropriated.
by attaching it to a card held for the employee, or
in any other way,
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.
In this Chapter “cash voucher” means a voucher, stamp or similar document capable of being exchanged for a sum of money which is— the expense incurred by the person at whose cost the voucher, stamp or similar document is provided.
greater than,
equal to, or
not substantially less than,
For the purposes of subsection (1) it does not matter whether the document—
is also capable of being exchanged for goods or services;
is capable of being exchanged singly or together with other vouchers, stamps, or documents;
is capable of being exchanged immediately or only after a time.
Subsection (1) is subject to section 76 (sickness benefits-related voucher).
This section applies where—
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”),
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
the whole or part of the difference between the exchange sum and the provision expense represents the sickness benefits costs.
The voucher, stamp or document is a cash voucher within the meaning of this Chapter if— or 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.
In this section “sickness benefits” mean benefits in connection with sickness, personal injury or death.
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.
This Chapter does not apply to a cash voucher if—
it is of a kind made available to the public generally, and
it is provided to the employee or a member of the employee’s family on no more favourable terms than to the public generally.
This Chapter does not apply to a cash voucher received by an employee if—
it is issued under a scheme, and
at the time when it is received the scheme is a scheme approved by the Inland Revenue for the purposes of this section.
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.
This Chapter does not apply to a cash voucher if it is—
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
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).
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.
The cash equivalent is the sum of money for which the voucher is capable of being exchanged.
This Chapter applies to a non-cash voucher provided for an employee by reason of the employment which is received by the employee.
A non-cash voucher provided for an employee by the employer is to be regarded as provided by reason of the employment unless—
the employer is an individual, and
the provision is made in the normal course of the employer’s domestic, family or personal relationships.
A non-cash voucher provided for an employee and appropriated to the employee— is to be treated for the purposes of this Chapter as having been received by the employee at the time when it is appropriated.
by attaching it to a card held for the employee, or
in any other way,
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.
In this Chapter “non-cash voucher” means— but does not include a cash voucher.
a voucher, stamp or similar document or token which is capable of being exchanged for money, goods or services,
a transport voucher, or
a cheque voucher,
For the purposes of subsection (1)(a) it does not matter whether the document or token is capable of being exchanged—
singly or together with other vouchers, stamps, documents or tokens;
immediately or only after a time.
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).
In this Chapter “cheque voucher” means a cheque—
provided for an employee, and
intended for use by the employee wholly or mainly for payment for— and, in relation to a cheque voucher, references to a voucher being exchanged for goods or services are to be read accordingly.
particular goods or services, or
goods or services of one or more particular classes;
This Chapter does not apply to a non-cash voucher if—
it is of a kind made available to the public generally, and
it is provided to the employee or a member of the employee’s family on no more favourable terms than to the public generally.
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).
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—
the employer,
a subsidiary of the employer,
a body corporate of which the employer is a subsidiary, or
another passenger transport undertaking.
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).
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.
The cash equivalent is the difference between—
the cost of provision, and
any part of that cost made good by the employee to the person incurring it.
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— by the person at whose cost they are provided.
the voucher, and
the money, goods or services for which it is capable of being exchanged,
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.
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.
This section is subject to section 89 (reduction for meal vouchers).
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—
in the tax year in which the cost of provision is incurred, or
if later, in the tax year in which the voucher is received by the employee.
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.
Where a cheque voucher is posted it is to be treated as handed over at the time of posting.
This section applies where—
the non-cash voucher is a meal voucher,
it is provided for an employee for use on a working day, and
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).
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.
In this section—
“meal voucher” means a non-cash voucher which—
can only be used to obtain meals,
is not transferable, and
is not of the kind in respect of which no liability to income tax arises under section 266(3)(e) (subsidised meals), and
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).
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.
A credit-token provided for an employee by the employer is to be regarded as provided by reason of the employment unless—
the employer is an individual, and
the provision is made in the normal course of the employer’s domestic, family or personal relationships.
For the purposes of this Chapter—
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
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.
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—
on the production of it, to supply money, goods or services on credit, or
if a third party (“Y”) supplies money, goods or services on its production, to pay Y for what is supplied.
A card, token, document or other object can be a credit-token even if—
some other action is required in addition to its production in order for the money, goods or services to be supplied;
X in paying Y may take a discount or commission.
For the purposes of this section—
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
the use of an object given by X to operate a machine provided by Y is to be treated as its production to Y.
A “credit-token” does not include a cash voucher or a non-cash voucher.
This Chapter does not apply to a credit-token if—
it is of a kind made available to the public generally, and
it is provided to the employee or a member of the employee’s family on no more favourable terms than to the public generally.
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.
The cash equivalent is the difference between—
the cost of provision, and
any part of that cost made good by the employee to the person incurring it.
In this section the “cost of provision” means the expense incurred—
in or in connection with the provision of the money, goods or services obtained on the occasion in question, and
by the person at whose cost they are provided.
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.
This section applies if the cash equivalent of the benefit of a cash voucher, a non-cash voucher or a credit-token—
is to be treated as earnings from an employee’s employment under this Chapter, or
would be so treated but for a dispensation given under section 96.
Money, goods or services obtained— are to be disregarded for the purposes of the Income Tax Acts.
by the employee or another person in exchange for the cash voucher or non-cash voucher, or
by the employee or a member of the employee’s family by use of the credit-token,
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).
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.
This section applies where a person (“P”) supplies the Inland Revenue with a statement of the cases and circumstances in which— are provided for employees whether they are the employees of P or some other person.
cash vouchers,
non-cash vouchers, or
credit-tokens,
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.
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.
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.
If in their opinion there is reason to do so, the Inland Revenue may revoke a dispensation by giving a further notice to P.
That notice may revoke the dispensation from—
the date when the dispensation was given, or
a later date specified in the notice.
If the notice revokes the dispensation from the date when the dispensation was given—
any liability to tax that would have arisen if the dispensation had never been given is to be treated as having arisen, and
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.
If the notice revokes the dispensation from a later date—
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
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.
This Chapter applies to living accommodation provided for— by reason of the employment.
an employee, or
a member of an employee’s family or household,
Living accommodation provided for any of those persons by the employer is to be regarded as provided by reason of the employment unless—
the employer is an individual, and
the provision is made in the normal course of the employer’s domestic, family or personal relationships.
This Chapter does not apply to living accommodation provided for an employee if—
the employer is a local authority,
it is provided for the employee by the authority, and
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.
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.
This Chapter does not apply to living accommodation provided for an employee if—
it is provided for the better performance of the duties of the employment, and
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.
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—
E has no material interest in the company, and
either—
E’s employment is as a full-time working director, or
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.
A company is “associated” with another if—
one has control of the other, or
both are under the control of the same person.
This Chapter does not apply to living accommodation provided for an employee if—
there is a special threat to the security of the employee,
special security arrangements are in force, and
the employee resides in the accommodation as part of those arrangements.
This Chapter does not apply to living accommodation provided for an employee if the accommodation is— and the employee is a person nominated in accordance with those trusts.
Chevening House, or
any other premises held on the trusts of the trust instrument set out in the Schedule to the Chevening Estate Act 1959 (c. 49),
If living accommodation to which this Chapter applies is provided in any period— the cash equivalent of the benefit of the accommodation is to be treated as earnings from the employment for that year.
which consists of the whole or part of a tax year, and
throughout which the employee holds the employment,
In this Chapter that period is referred to as “the taxable period”.
Section 103 indicates how the cash equivalent is calculated.
The cash equivalent is calculated—
under section 105 if the cost of providing the living accommodation does not exceed £75,000; and
under section 106 if the cost of providing the living accommodation exceeds £75,000.
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.
In this Chapter— have the meaning given by sections 110 to 113, and “the taxable period” has the meaning given by section 102(2).
“annual value”,
“person involved in providing accommodation”, and
a goods vehicle,
a motor cycle,
For any tax year the cost of providing living accommodation is given by the formula— 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— reimbursement of A or I, or consideration for the grant to the employee of a tenancy or sub-tenancy of the property.
The cash equivalent is to be calculated under this section if the cost of providing the living accommodation does not exceed £75,000.
The cash equivalent is the difference between—
the rental value of the accommodation for the taxable period, and
any sum made good by the employee to the person at whose cost the accommodation is provided that is properly attributable to its provision.
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.
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—
subsection (3) does not apply to that period or (as the case may be) that part of it; and
instead the “rental value of the accommodation” for that period or part is the rent payable for it by that person.
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.
The cash equivalent is calculated under this section if the cost of providing the living accommodation exceeds £75,000.
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”)— 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— in accordance with section 104 (general rule for calculating cost of accommodation), or 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— adding together the amounts calculated under steps 1 and 3, and (if allowed by subsection (3)) subtracting from that total the excess rent paid by the employee.
In step 4—
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
“the excess rent” means the total amount of that excess.
This section contains a special rule for calculating the cost of providing living accommodation which—
operates for the purposes of step 2 of section 106(2) (calculating the additional yearly rent), and
accordingly only operates where the cost of provision for the purposes of section 106(1) (as calculated under section 104) exceeds £75,000.
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.
For any tax year the cost of providing the living accommodation for the purposes mentioned in subsection (1)(a) is given by the formula— 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— beginning with the initial date, and 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— 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, reimbursement of I, or consideration for the grant to the employee of a tenancy or sub-tenancy of the property.
In estimating MV no reduction is to be made for an option in respect of the property held by—
the employee,
a person connected with the employee, or
a person involved in providing the accommodation.
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.
The cash equivalent for each of the employees is to be such part of that amount as is just and reasonable.
This section applies if—
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
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.
The full amount of the cash equivalent is to be treated as earnings from the employment for that year under this Chapter.
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).
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—
the tenant undertook to pay all taxes, rates and charges usually paid by a tenant, and
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.
For the purposes of subsection (1) that rent—
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
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.
If living accommodation is of a kind that might reasonably be expected to be let on terms under which— the rent to be established under subsection (1) in respect of the accommodation is to be increased under subsection (4).
the landlord is to provide any services which are either—
relevant services, or
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
amounts are payable in respect of the services in addition to the rent,
That rent is to include—
where the services are relevant services, so much of the additional amounts as exceeds the cost to the landlord of providing the services;
where the services are within subsection (3)(a)(ii), the whole of the additional amounts.
In this section “relevant service” means a service other than the repair, insurance or maintenance of the accommodation or of any other premises.
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.
The question is to be determined by the General Commissioners.
The Commissioners must hear and determine the question in the same way as an appeal.
For the purposes of this Chapter “person involved in providing the accommodation” means any of the following—
the person providing the accommodation;
the employee’s employer (if not within paragraph (a));
any person, other than the employee, who is connected with a person within paragraph (a) or (b).
For the purposes of this Chapter “the property”, in relation to living accommodation, means the property consisting of that accommodation.
This Chapter applies to a car or a van in relation to a particular tax year if in that year the car or van—
is made available (without any transfer of the property in it) to an employee or a member of the employee’s family or household,
is so made available by reason of the employment (see section 117), and
is available for the employee’s or member’s private use (see section 118).
Where this Chapter applies to a car or van—
sections 120 to 148 provide for the cash equivalent of the benefit of the car to be treated as earnings,
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
sections 154 to 166 provide for the cash equivalent of the benefit of the van to be treated as earnings.
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).
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).
In this Chapter—
For the purposes of subsection (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.
References in this Chapter to—
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
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).
This section does not apply to section 138 (automatic car for a disabled employee).
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—
the employer is an individual, and
it is so made available in the normal course of the employer’s domestic, family or personal relationships.
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—
the terms on which it is made available prohibit such use, and
it is not so used.
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)).
This section applies where in a tax year—
a car is made available as mentioned in section 114(1), and
an alternative to the benefit of the car is offered.
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).
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.
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.
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.
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).
The cash equivalent may be reduced under section 148 where the car is shared.
For the purposes of this Chapter the price of a car means—
its list price, if it has one, or
its notional price, if it has no list price.
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—
in the United Kingdom,
singly,
in a retail sale,
in the open market, and
on the day immediately before the date of the car’s first registration.
The “inclusive price” means the price inclusive of—
any charge for delivery by the manufacturer, importer or distributor to the seller’s place of business, and
any relevant taxes (see section 171(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—
in the United Kingdom,
singly,
in a retail sale,
in the open market,
on the day immediately before the date of the car’s first registration, and
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.
In this section “inclusive price” has the same meaning as in section 123.
In this Chapter “qualifying accessory” means an accessory which—
is made available for use with the car without any transfer of the property in the accessory,
is made available by reason of the employment, and
is attached to the car (whether permanently or not).
For the purposes of this Chapter “accessory” includes any kind of equipment but does not include—
equipment necessarily provided for use in the performance of the duties of the employment;
equipment by means of which a car is capable of running on road fuel gas;
equipment to enable a disabled person to use a car (see section 172);
a mobile telephone (within the meaning given in section 319(2)).
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.
In this Chapter—
The price of the following accessories is to be taken into account under step 2 of section 121(1)—
in the case of a car with a list price, the price of any initial extra accessory, and
in the case of any car, the price of any later accessory.
In this Chapter an “initial extra accessory” means a qualifying accessory which—
is a non-standard accessory,
is available with the car at the time when it is first made available to the employee, and
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.
In this Chapter a “later accessory” means a qualifying accessory which—
is available with the car in the tax year in question,
was not available with the car at the time when it was first made available to the employee,
was not made available with the car before 1st August 1993, and
has a price of at least £100.
In this section references to the price of an accessory are to—
its list price, if it has one, or
its notional price, if it has no list price.
This section is subject to section 131 (replacement accessories).
For the purposes of this Chapter the list price of an initial extra accessory is—
the published price of the manufacturer, importer or distributor of the car (see section 128), or
if there is no such price, the published price of the manufacturer, importer or distributor of the accessory (see section 129).
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).
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—
in the United Kingdom,
singly,
in a retail sale,
in the open market, and
on the day immediately before the date of the car’s first registration.
The “inclusive price” means the price inclusive of—
any charge for delivery by the manufacturer, importer or distributor to the seller’s place of business,
any relevant taxes other than car tax (see section 171(1)), and
any charge for fitting the accessory.
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—
in the United Kingdom,
singly,
in a retail sale,
in the open market, and
at the time immediately before the accessory concerned is first made available for use with the car.
The “inclusive price” means the price inclusive of—
any charge for delivery by the manufacturer, importer or distributor to the seller’s place of business,
any relevant taxes other than car tax (see section 171(1)), and
in the case of an accessory permanently attached to the car, the price which the seller would charge for attaching it.
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.
In this Chapter the “notional price” of an accessory means the inclusive price which it might reasonably have been expected to fetch if sold—
in the United Kingdom,
singly,
in a retail sale,
in the open market, and
at the time immediately before the accessory concerned is first made available for use with the car.
The “inclusive price” means the price inclusive of—
any charge for delivery by the manufacturer, importer or distributor to the seller’s place of business,
any relevant taxes other than car tax (see section 171(1)), and
in the case of an accessory permanently attached to the car, the price which the seller would charge for attaching it.
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.
This section applies where—
a later accessory is available with the car in the tax year in question,
that accessory (“the new accessory”) replaced another qualifying accessory (“the old accessory”) in that year or an earlier tax year, and
the new accessory is of the same kind as the old accessory.
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—
the replacement has not been made, and
the new accessory is a continuation of the old accessory.
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)—
as if the old accessory was not available with the car in that tax year, or
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.
The conditions mentioned in subsection (3) are that—
the old accessory was a non-standard accessory, and
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.
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—
the price of the old accessory, and
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.
In this section references to the price of an accessory are to—
its list price, if it has one, or
its notional price, if it has no list price.
This section applies if the employee contributes a capital sum to expenditure on the provision of—
the car, or
any qualifying accessory which is taken into account in calculating the cash equivalent of the benefit of the car.
A deduction is to be made from the amount carried forward from step 2 of section 121(1)—
for the tax year in which the contribution is made, and
for all subsequent years in which the employee is chargeable to tax in respect of the car by virtue of section 120.
The amount of the deduction allowed in any tax year is the lesser of—
the total of the capital sums contributed by the employee in that year and any earlier years to expenditure on the provision of—
the car, or
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
£5,000.
The “appropriate percentage” for a car for a year depends upon when the car was first registered.
If the car was first registered on or after 1st January 1998, the “appropriate percentage” depends upon whether the car— and is determined under sections 139 to 141.
is a car with a CO2 emissions figure (see section 134(1)),
is a car without a CO2 emissions figure (see section 134(2)), or
is a diesel car to which section 141 applies,
If the car was first registered before 1st January 1998, the “appropriate percentage” is determined under section 142.
In this Chapter a “car with a CO2 emissions figure” means—
a car first registered on or after 1st January 1998 but before 1st October 1999 to which section 135 applies,
a car first registered on or after 1st October 1999 to which section 136 applies, or
a car first registered on or after 1st January 2000 which is a car to which section 137 (bi-fuel cars) applies.
In this Chapter a “car without a CO2 emissions figure” means any other car first registered on or after 1st January 1998.