House of Lords portcullis
House of Lords
Session 2002 - 03
Internet Publications
Other Bills before Parliament

Income Tax (Earnings and Pensions) Bill


Income Tax (Earnings and Pensions) Bill
Part 3 — Employment income: earnings and benefits etc. treated as earnings
Chapter 10 — Taxable benefits: residual liability to charge

    98

 

Chapter 10

Taxable benefits: residual liability to charge

Introduction

 201   Employment-related benefits

     (1)    This Chapter applies to employment-related benefits.

5

     (2)    In this Chapter—

                    “benefit” means a benefit or facility of any kind;

                    “employment-related benefit” means a benefit, other than an excluded

benefit, which is provided in a tax year—

                  (a)                 for an employee, or

10

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

                    by reason of the employment.

            For the definition of “excluded benefit” see section 202.

     (3)    A benefit provided by an employer is to be regarded as provided by reason of

the employment unless—

15

           (a)           the employer is an individual, and

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

family or personal relationships.

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

held at the time when the benefit is provided so long as it is held at some point

20

in the tax year in which the benefit is provided.

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

former employee.

 202   Excluded benefits

     (1)    A benefit is an “excluded benefit” for the purposes of this Chapter if—

25

           (a)           any of Chapters 3 to 9 of the benefits code applies to the benefit,

           (b)           any of those Chapters would apply to the benefit but for an exception,

or

           (c)           the benefit consists in the right to receive, or the prospect of receiving,

sums treated as earnings under section 221 (payments where employee

30

absent because of sickness or disability).

     (2)    In this section “exception”, in relation to the application of a Chapter of the

benefits code to a benefit, means any enactment in the Chapter which provides

that the Chapter does not apply to the benefit.

            But for this purpose section 86 (transport vouchers under pre-26th March 1982

35

arrangements) is not an exception.

 

 

Income Tax (Earnings and Pensions) Bill
Part 3 — Employment income: earnings and benefits etc. treated as earnings
Chapter 10 — Taxable benefits: residual liability to charge

    99

 

Cash equivalent of benefit treated as earnings

 203   Cash equivalent of benefit treated as earnings

     (1)    The cash equivalent of an employment-related benefit is to be treated as

earnings from the employment for the tax year in which it is provided.

     (2)    The cash equivalent of an employment-related benefit is the cost of the benefit

5

less any part of that cost made good by the employee to the persons providing

the benefit.

     (3)    The cost of an employment-related benefit is determined in accordance with

section 204 unless—

           (a)           section 205 provides that the cost is to be determined in accordance

10

with that section, or

           (b)           section 206 provides that the cost is to be determined in accordance

with that section.

Determination of the cost of the benefit

 204   Cost of the benefit: basic rule

15

The cost of an employment-related benefit is the expense incurred in or in

connection with provision of the benefit (including a proper proportion of any

expense relating partly to provision of the benefit and partly to other matters).

 205   Cost of the benefit: asset made available without transfer

     (1)    The cost of an employment-related benefit (“the taxable benefit”) is determined

20

in accordance with this section if—

           (a)           the benefit consists in—

                  (i)                 an asset being placed at the disposal of the employee, or at the

disposal of a member of the employee’s family or household,

for the employee’s or member’s use, or

25

                  (ii)                an asset being used wholly or partly for the purposes of the

employee or a member of the employee’s family or household,

and

           (b)           there is no transfer of the property in the asset.

     (2)    The cost of the taxable benefit is the higher of—

30

           (a)           the annual value of the use of the asset, and

           (b)           the annual amount of the sums, if any, paid by those providing the

benefit by way of rent or hire charge for the asset,

            together with the amount of any additional expense.

     (3)    For the purposes of subsection (2), the annual value of the use of an asset is—

35

           (a)           in the case of land, its annual rental value;

           (b)           in any other case, 20% of the market value of the asset at the time when

those providing the taxable benefit first applied the asset in the

provision of an employment-related benefit (whether or not the person

provided with that benefit is also the person provided with the taxable

40

benefit).

 

 

Income Tax (Earnings and Pensions) Bill
Part 3 — Employment income: earnings and benefits etc. treated as earnings
Chapter 10 — Taxable benefits: residual liability to charge

    100

 

            If those providing the taxable benefit first applied the asset in the provision of

an employment-related benefit before 6th April 1980, paragraph (b) is to be

read as if the reference to 20% were a reference to 10%.

     (4)    In this section “additional expense” means the expense incurred in or in

connection with provision of the taxable benefit (including a proper proportion

5

of any expense relating partly to provision of the benefit and partly to other

matters), other than—

           (a)           the expense of acquiring or producing the asset incurred by the person

to whom the asset belongs, and

           (b)           any rent or hire charge payable for the asset by those providing the

10

asset.

 206   Cost of the benefit: transfer of used or depreciated asset

     (1)    The cost of an employment-related benefit is determined in accordance with

this section if—

           (a)           the benefit consists in the transfer of an asset, and

15

           (b)           the asset has been used, or has depreciated, since the person

transferring the asset (“the transferor”) acquired or produced it.

     (2)    The cost of the benefit is the market value of the asset at the time of the transfer.

     (3)    But the cost of the benefit (“the current benefit”) is the higher of the market

value of the asset at the time of the transfer and the amount calculated in

20

accordance with subsection (5) if—

           (a)           the asset is not a car (within the meaning of Chapter 6),

           (b)           the asset has previously been applied in the provision of a relevant

employment-related benefit (whether or not the person provided with

that benefit is also the transferee), and

25

           (c)           the transferor first applied the asset in the provision of an employment-

related benefit after 5th April 1980.

     (4)    In this section “relevant employment-related benefit” means an employment-

related benefit the cost of which was to be determined in accordance with

section 205 of this Act.

30

     (5)    The amount referred to in subsection (3) is calculated in accordance with the

following steps—

            

            Step 1

            Determine the tax years in which the asset was applied in the provision of a

35

relevant employment-related benefit (including, if appropriate, the current tax

year).

            

            Step 2

            Determine the cost of the benefit for each of those tax years in accordance with

40

section 205.

            

            Step 3

            Calculate the total of the amounts determined under step 2.

            

45

            Step 4

 

 

Income Tax (Earnings and Pensions) Bill
Part 3 — Employment income: earnings and benefits etc. treated as earnings
Chapter 10 — Taxable benefits: residual liability to charge

    101

 

            Calculate the market value of the asset at the time when the transferor first

applied it in the provision of an employment-related benefit.

            

            Step 5

            Deduct the total calculated under step 3 from the market value calculated

5

under step 4.

            

            The result is the amount referred to in subsection (3).

Supplementary provisions

 207   Meaning of “annual rental value”

10

     (1)    For the purposes of this Chapter the “annual rental value” of land is the rent

which might reasonably be expected to be obtained on a letting from year to

year if—

           (a)           the tenant undertook to pay all taxes, rates and charges usually paid by

a tenant, and

15

           (b)           the landlord undertook to bear the costs of the repairs and insurance

and other expenses (if any) necessary for maintaining the land in a state

to command the rent.

     (2)    For the purposes of subsection (1) that rent—

           (a)           is to be taken to be the amount that might reasonably be expected to be

20

so obtained in respect of the letting, and

           (b)           is to be calculated on the basis that the only amounts that may be

deducted in respect of services provided by the landlord are amounts

in respect of the cost to the landlord of providing any relevant services.

     (3)    If the land is of a kind that might reasonably be expected to be let on terms

25

under which—

           (a)           the landlord is to provide any services which are either—

                  (i)                 relevant services, or

                  (ii)                the repair, insurance or maintenance of any premises which do

not form part of the land but belong to or are occupied by the

30

landlord, and

           (b)           amounts are payable in respect of the services in addition to the rent,

            the rent to be established under subsection (1) in respect of the land is to be

increased under subsection (4).

     (4)    That rent is to include—

35

           (a)           where the services are relevant services, so much of the additional

amounts as exceeds the cost to the landlord of providing the services;

           (b)           where the services are within subsection (3)(a)(ii), the whole of the

additional amounts.

     (5)    In this section “relevant service” means a service other than the repair,

40

insurance or maintenance of the land or of any other land.

 

 

 
previous section contents continue
 
House of Lords home page Houses of Parliament home page House of Commons home page search page enquiries

© Parliamentary copyright 2003
Revised 17 February 2003