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Income Tax (Earnings and Pensions) Bill


Income Tax (Earnings and Pensions) Bill
Part 3 — Employment income: earnings and benefits etc. treated as earnings
Chapter 2 — Taxable benefits: the benefits code

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                    Chapter 4 (vouchers and credit-tokens),

                    Chapter 5 (living accommodation), and

                    Chapter 11 (exclusion of lower-paid employments from parts of benefits

code).

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

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     (4)    In the benefits code “excluded employment” means an employment to which

the exclusion in section 216(1) applies.

 64    Relationship between earnings and benefits code

     (1)    This section applies if, apart from this section, the same benefit would give rise

to two amounts (“A” and “B”)—

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

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

     (2)    In such a case—

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

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

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under the benefits code.

     (3)    This section does not apply in connection with living accommodation to which

Chapter 5 of this Part applies.

     (4)    In that case section 109 applies to determine the relationship between that

Chapter and Chapter 1 of this Part.

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     (5)    This section does not apply if section 193 (notional loan where acquisition of

shares made for less than market value) applies.

     (6)    In that case sections 194 (amount of notional loan) and 196 (effects on other

income tax charges) apply to determine the relationship between Chapters 1

and 8 of this Part.

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

paid employment

     (1)    This section applies for the purposes of the listed provisions where a person

(“P”) supplies the Inland Revenue with a statement of the cases and

circumstances in which—

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

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

employees,

            whether they are employees of P or some other person.

     (2)    The “listed provisions” are the provisions listed in section 216(4) (provisions of

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the benefits code which do not apply to lower-paid employments).

     (3)    If the Inland Revenue are satisfied that no additional tax is payable by virtue of

the listed provisions by reference to the payments, benefits or facilities

mentioned in the statement, they must give P a dispensation under this section.

     (4)    A “dispensation” is a notice stating that the Inland Revenue agree that no

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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.

 

 

Income Tax (Earnings and Pensions) Bill
Part 3 — Employment income: earnings and benefits etc. treated as earnings
Chapter 2 — Taxable benefits: the benefits code

    36

 

     (5)    If a dispensation is given under this section, nothing in the listed provisions

applies to the payments, or the provision of the benefits or facilities, covered

by the dispensation or otherwise has the effect of imposing any additional

liability to tax in respect of them.

     (6)    If in their opinion there is reason to do so, the Inland Revenue may revoke a

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dispensation by giving a further notice to P.

     (7)    That notice may revoke the dispensation from—

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

           (b)           a later date specified in the notice.

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

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given—

           (a)           any liability to tax that would have arisen if the dispensation had never

been given is to be treated as having arisen, and

           (b)           P and the employees in question must make all the returns which they

would have had to make if the dispensation had never been given.

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

           (a)           any liability to tax that would have arisen if the dispensation had

ceased to have effect on that date is to be treated as having arisen, and

           (b)           P and the employees in question must make all the returns which they

would have had to make if the dispensation had ceased to have effect

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on that date.

General definitions for benefits code

 66    Meaning of “employment” and related expressions

     (1)    In the benefits code—

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

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

meanings.

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

           (a)           references in that Chapter to “the employment” are to the employment

of that employee, and

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           (b)           references in that Chapter to “the employer” are to the employer in

respect of that employment.

     (3)    For the purposes of the benefits code an employment is a “taxable employment

under Part 2” in a tax year if the earnings from the employment for that year

are (or would be if there were any) general earnings to which the charging

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provisions of Chapter 4 or 5 of Part 2 apply.

     (4)    In subsection (3)—

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

company, and

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

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

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

 

 

Income Tax (Earnings and Pensions) Bill
Part 3 — Employment income: earnings and benefits etc. treated as earnings
Chapter 2 — Taxable benefits: the benefits code

    37

 

           (a)           in relation to a company whose affairs are managed by a board of

directors or similar body, a member of that body,

           (b)           in relation to a company whose affairs are managed by a single director

or similar person, that director or person, and

           (c)           in relation to a company whose affairs are managed by the members

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themselves, a member of the company,

            and includes any person in accordance with whose directions or instructions

the directors of the company (as defined above) are accustomed to act.

     (2)    For the purposes of subsection (1) a person is not to be regarded as a person in

accordance with whose directions or instructions the directors of the company

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are accustomed to act merely because the directors act on advice given by that

person in a professional capacity.

     (3)    In the benefits code “full-time working director” means a director who is

required to devote substantially the whole of his time to the service of the

company in a managerial or technical capacity.

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 68    Meaning of “material interest” in a company

     (1)    For the purposes of the benefits code a person has a material interest in a

company if condition A or B is met.

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

associate of that person (with or without one or more such associates) is—

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           (a)           the beneficial owner of, or

           (b)           able to control, directly or through the medium of other companies or

by any other indirect means,

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

     (3)    Condition B is that, in the case of a close company, the person (with or without

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one or more associates) or any associate of that person (with or without one or

more such associates), possesses or is entitled to acquire, such rights as

would—

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

           (b)           in any other circumstances,

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            give an entitlement to receive more than 5% of the assets which would then be

available for distribution among the participators.

     (4)    In this section—

                    “associate” has the meaning given by section 417(3) of ICTA except that,

for this purpose, “relative” in section 417(3) has the meaning given by

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subsection (5) below, and

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

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

is—

           (a)           B’s spouse,

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

spouse,

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

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

 

 

Income Tax (Earnings and Pensions) Bill
Part 3 — Employment income: earnings and benefits etc. treated as earnings
Chapter 3 — Taxable benefits: expenses payments

    38

 

 69    Extended meaning of “control”

     (1)    The definition of “control” in section 840 of ICTA (which is applied for the

purposes of this Act by section 719) is extended as follows.

     (2)    For the purposes of the benefits code that definition applies (with the necessary

modifications) in relation to an unincorporated association as it applies in

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relation to a body corporate.

Chapter 3

Taxable benefits: expenses payments

 70    Sums in respect of expenses

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

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

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

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

sum—

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

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

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

     (3)    For the purposes of this Chapter it does not matter whether the employment is

held at the time when the sum is paid or paid away so long as it is held at some

point in the tax year in which the sum is paid or paid away.

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

former employee.

     (5)    This Chapter does not apply to the extent that the sum constitutes earnings

from the employment by virtue of any other provision.

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

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     (1)    If an employer pays a sum in respect of expenses to an employee it is to be

treated as paid by reason of the employment unless—

           (a)           the employer is an individual, and

           (b)           the payment is made in the normal course of the employer’s domestic,

family or personal relationships.

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     (2)    If an employer puts a sum at an employee’s disposal in respect of expenses it

is to be treated as put at the employee’s disposal by reason of the employment

unless—

           (a)           the employer is an individual, and

           (b)           the sum is put at the employee’s disposal in the normal course of the

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employer’s domestic, family or personal relationships.

 72    Sums in respect of expenses treated as earnings

     (1)    If this Chapter applies to a sum, the sum is to be treated as earnings from the

employment for the tax year in which it is paid or paid away.

 

 

Income Tax (Earnings and Pensions) Bill
Part 3 — Employment income: earnings and benefits etc. treated as earnings
Chapter 4 — Taxable benefits: vouchers and credit-tokens

    39

 

     (2)    Subsection (1) does not prevent the making of a deduction allowed under any

of the provisions listed in subsection (3).

     (3)    The provisions are—

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

                    section 337 (travel in performance of duties);

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                    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);

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                    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).

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Chapter 4

Taxable benefits: vouchers and credit-tokens

Cash vouchers: introduction

 73    Cash vouchers to which this Chapter applies

     (1)    This Chapter applies to a cash voucher provided for an employee by reason of

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the employment which is received by the employee.

     (2)    A cash voucher provided for an employee by the employer is to be regarded as

provided by reason of the employment unless—

           (a)           the employer is an individual, and

           (b)           the provision is made in the normal course of the employer’s domestic,

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family or personal relationships.

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

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

           (b)           in any other way,

            is to be treated for the purposes of this Chapter as having been received by the

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employee at the time when it is appropriated.

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

For the purposes of this Chapter any reference to a cash voucher being

provided for or received by an employee includes a reference to it being

provided for or received by a member of the employee’s family.

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Revised 17 February 2003