208 Meaning of “market value”
For the purposes of this Chapter the market value of an asset at any time is the
price which the asset might reasonably be expected to fetch on a sale in the
open market at that time.
209 Meaning of “persons providing benefit”
For the purposes of this Chapter the persons providing a benefit are the person
or persons at whose cost the benefit is provided.
210 Power to exempt minor benefits
(1) The Treasury may make provision by regulations for exempting from the
application of this Chapter such minor benefits as may be specified in the
(2) An exemption conferred by such regulations is conditional on the benefit being
made available to the employer’s employees generally on similar terms.
Special rules for scholarships
211 Special rules for scholarships: introduction
(1) Sections 212 to 214 supplement the preceding provisions of this Chapter in the
section 212 provides for certain scholarships provided under
arrangements entered into by an employer or a connected person to be
regarded as provided by reason of an employment;
section 213 provides that this Chapter does not apply to certain
scholarships provided under a trust fund or a scheme;
section 214 provides a different method of determining the cost of an
employment-related benefit if it consists in the provision of a
scholarship from a trust fund.
(2) Section 215 limits the extent to which section 331 of ICTA (exemption for
scholarship income) applies to a scholarship whose provision constitutes an
(3) In this section and sections 212 to 215 “scholarship” includes a bursary,
exhibition or other similar educational endowment.
212 Scholarships provided under arrangements entered into by employer or
(1) A scholarship which is provided for a member of an employee’s family or
household is to be regarded for the purposes of this Chapter as provided by
reason of the employment if it is provided under arrangements entered into
(a) the employer, or
(b) a person connected with the employer.
(2) Subsection (1) applies whether or not the arrangements require the employer
or the connected person to contribute directly or indirectly to the cost of
providing the scholarship.
(3) A scholarship is not to be regarded as provided by reason of an employment
by virtue of subsection (1) if—
(a) the employer is an individual, and
(b) the arrangements are made in the normal course of the employer’s
domestic, family or personal relationships.
(4) This section is without prejudice to section 201(3).
213 Exception for certain scholarships under trusts or schemes
(1) This Chapter does not apply to an employment-related benefit consisting in the
provision of a scholarship if conditions A, B, C and D are met.
(2) Condition A is that the scholarship would not be regarded as provided by
reason of the employment if section 201(3) and section 212 were disregarded.
(3) Condition B is that the holder of the scholarship is a full-time student.
(4) Condition C is that the scholarship is provided from a trust fund or under a
(5) Condition D is that, in the tax year in which the scholarship is provided, not
more than 25% of the total amount of relevant payments is attributable to
scholarships provided by reason of a person’s employment.
(6) For the purposes of conditions B and D “full-time student” means a person
who is in full-time education at a university, college, school or other
(7) For the purposes of condition D—
“employment” includes any employment within the meaning of the
employment income Parts (see section 4), whether or not it is a taxable
employment under Part 2;
“relevant payments” means the payments made from the fund or scheme
mentioned in condition C in respect of scholarships held by full-time
214 Scholarships: cost of the benefit
If an employment-related benefit consists in the provision of a scholarship
from a trust fund—
(a) section 204 does not apply, and
(b) the cost of the benefit is the total of the payments made from the fund
to the person holding the scholarship.
215 Limitation of exemption for scholarship income in section 331 of ICTA
If an employment-related benefit consists in the provision of a scholarship,
section 331(1) of ICTA (exemption for scholarship income) applies only in
relation to the holder of the scholarship.
Taxable benefits: exclusion of lower-paid employments from parts of benefits
216 Provisions not applicable to lower-paid employments
(1) The Chapters of the benefits code listed in subsection (4) do not apply to an
employment in relation to a tax year if—
(a) it is lower-paid employment in relation to that year (see section 217),
(b) condition A or B is met.
(2) Condition A is that the employee is not employed as a director of a company.
(3) Condition B is that the employee is employed as a director of a company but
has no material interest in the company and either—
(a) the employment is as a full-time working director, or
(b) the company is non-profit-making or is established for charitable
“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
(4) The Chapters referred to in subsection (1) are—
Chapter 3 (taxable benefits: expenses payments);
Chapter 6 (taxable benefits: cars, vans and related benefits);
Chapter 7 (taxable benefits: loans);
Chapter 8 (taxable benefits: notional loans in respect of acquisitions of
Chapter 9 (taxable benefits: disposals of shares for more than market
Chapter 10 (taxable benefits: residual liability to charge).
(5) Subsection (1)—
(a) means that in any of those Chapters a reference to an employee does
not include an employee whose employment is within the exclusion in
that subsection, if the context is such that the reference is to an
employee in relation to whom the Chapter applies, but
(b) does not restrict the meaning of references to employees in other
(6) Subsection (1) has effect subject to—
section 188(2) (discharge of loan: where employment becomes lower-
section 195(3) (discharge of notional loan: where employment becomes
section 199(4) (disposal for more than market value: where employment
becomes lower-paid), and
section 220 (employment in two or more related employments).
What is lower-paid employment
217 Meaning of “lower-paid employment”
(1) For the purposes of this Chapter an employment is “lower-paid employment”
in relation to a tax year if the earnings rate for the employment for the year
(calculated under section 218) is less than £8,500.
(2) Subsection (1) is subject to section 220 (employment in two or more related
218 Calculation of earnings rate for a tax year
(1) For any tax year the earnings rate for an employment is to be calculated as
Find the total of the following amounts—
(a) the total amount of the earnings from the employment for the year
within Chapter 1 of this Part,
(b) the total of any amounts that are treated as earnings from the
employment for the year under the benefits code (see subsections (2)
(c) the total of any amounts that are treated as earnings from the
employment for the year under Chapter 12 of this Part (payments
treated as earnings), and
(d) in the case of an employment within section 56(2) (deemed
employment of worker by intermediary), the amount of the deemed
employment payment for the year (see section 54),
excluding any exempt income.
Add to that total any extra amount required to be added for the year by section
219 (extra amounts to be added in connection with a car).
Subtract the total amount of any authorised deductions (see subsection (4))
from the result of step 2.
The earnings rate for the employment for the year is given by the formula—
R is the result of step 3,
Y is the number of days in the year, and
E is the number of days in the year when the employment is held.
(2) Section 216(1) (provisions not applicable to lower-paid employment) is to be
disregarded for the purpose of determining any amount under step 1.
(3) If the benefit of living accommodation is to be taken into account under step 1,
the cash equivalent is to be calculated in accordance with section 105 (even if
the cost of providing the accommodation exceeds £75,000).
(4) For the purposes of step 3 “authorised deduction” means any deduction that
would (assuming it was an amount of taxable earnings) be allowed from any
amount within step 1 under—
section 346 (employee liabilities),
section 352 (agency fees paid by entertainers),
section 355 (corresponding payments by non-domiciled employees with
section 368 (fixed sum deductions from earnings payable out of public
section 370 (travel costs and expenses where duties performed abroad:
section 371 (travel costs and expenses where duties performed abroad:
visiting spouse’s or child’s travel),
section 373 (non-domiciled employee’s travel costs and expenses where
duties performed in UK),
section 374 (non-domiciled employee’s spouse’s or child’s travel costs
and expenses where duties performed in UK),
section 376 (foreign accommodation and subsistence costs and expenses
section 377 (costs and expenses in respect of personal security assets and
section 713 (payroll giving to charities),
section 592(7) of ICTA (contributions to exempt approved schemes),
section 594 of ICTA (contributions to exempt statutory schemes), or
section 262 of CAA 2001 (capital allowances to be given effect by treating
them as deductions).
219 Extra amounts to be added in connection with a car
(1) The provisions of this section apply for the purposes of section 218(1) in the
case of a tax year in which a car is made available as mentioned in section
114(1) (cars, vans and related benefits) by reason of the employment.
(2) Subsection (3) applies if in the tax year—
(a) an alternative to the benefit of the car is offered, and
(b) the amount that would be earnings within Chapter 1 of this Part if the
benefit of the car were to be determined by reference to the alternative
offered exceeds the benefit code earnings (see subsection (4)).
(3) The amount of the excess is an extra amount to be added under step 2 in section
(4) For the purposes of subsection (2) “the benefit code earnings” is the total for the
(a) the cash equivalent of the benefit of the car (calculated in accordance
with Chapter 6 of this Part), and
(b) the cash equivalent (calculated in accordance with that Chapter) of the
benefit of any fuel provided for the car by reason of the employment.
(5) Subsection (6) applies if in the tax year there would be an amount of general
earnings consisting of—
(a) earnings within Chapter 1 of this Part, or
(b) an amount treated as earnings from the employment under Chapter 3
(expenses) or Chapter 4 (vouchers and credit-tokens) of this Part,
if section 239 or 269 (exemptions in respect of payments or benefits connected
with taxable cars etc.) did not apply to the discharge of a liability, or to a
payment or benefit, in connection with the car.
(6) The amount of general earnings mentioned in subsection (5) is an extra amount
to be added under step 2 in section 218(1).
(7) Section 216(1) (provisions not applicable to lower-paid employment) is to be
disregarded for the purpose of determining any amount under this section.
Treatment of related employments
220 Related employments
(1) This section applies if a person is employed in two or more related
(2) None of the employments is to be regarded as lower-paid employment in
relation to a tax year if—
(a) the total of the earnings rates for the employments for the year
(calculated in each case under section 218) is £8,500 or more, or
(b) any of them is an employment falling outside the exclusion contained
in section 216(1) (provisions not applicable to lower-paid employment).
(3) For the purposes of this section two employments are “related” if—
(a) both are with the same employer, or
(b) one is with a body or partnership (“A”) and the other is either—
(i) with an individual, partnership or body that controls A (“B”), or
(ii) with another partnership or body also controlled by B.
Payments treated as earnings
221 Payments where employee absent because of sickness or disability
(1) This section applies if—
(a) an employee is absent from work because of sickness or disability, and
(b) a qualifying sickness payment is made in respect of the employee’s
absence from work.
(2) But this section does not apply if the qualifying sickness payment constitutes
earnings from the employment by virtue of any other provision.
(3) The qualifying sickness payment is to be treated as earnings from the
employment in respect of the period of absence.
(4) If the qualifying sickness payment is made from funds to which the employer
and the employer’s employees have made contributions, only the amount of
(4) the payment which it is just and reasonable to attribute to the employer’s
contributions is treated as earnings under this section.
(5) In this section “qualifying sickness payment” means a payment which meets
conditions A and B.
(6) Condition A is that the payment is made—
(a) to the employee or to a member of the employee’s family,
(b) to the order of such a person, or
(c) to the benefit of such a person.
(7) Condition B is that the payment is made—
(a) by reason of the employment, and
(b) as a result of arrangements entered into by the employer.
222 Payments by employer on account of tax where deduction not possible
(1) This section applies if—
(a) an employer is treated by virtue of sections 687, 689 and 693 to 700 as
having made a payment of income of an employee (“the notional
(b) the employer is required by virtue of section 710(4) to account to the
Inland Revenue for an amount of income tax (“the due amount”) in
respect of the notional payment, and
(c) the employee does not, before the end of the period of 30 days
beginning with the date on which the employer is treated as making the
notional payment, make good the due amount to the employer.
(2) The due amount is to be treated as earnings from the employment for the tax
year in which the date mentioned in subsection (1)(c) falls.
(3) In this section “employer”, in relation to any provision of sections 687, 689, 693
to 700 or 710, means the person taken to be the employer for the purposes of
It also includes a person who is treated as making a payment of PAYE income
by virtue of section 689(2) (payments by person for whom employee works but
who is not the employer).
223 Payments on account of director’s tax other than by the director
(1) This section applies if in a tax year—
(a) a person (“P”) makes a payment to another person who is employed as
the director of a company,
(b) the payment is of, or on account of, earnings from the director’s
(c) PAYE regulations require P to deduct an amount of income tax (“the
(d) P deducts none, or only some, of the deductible tax, and
(e) either or both of the following occur—
(i) P accounts to the Board of Inland Revenue for some or all of the
deductible tax (whether or not P has actually deducted the
amount accounted for);