Office of Public Sector Information
PART 3 continued CHAPTER 10 continued
(1) For the purposes of this Chapter the “annual rental value” of land is the rent which might reasonably be expected to be obtained on a letting from year to year if—
(a) the tenant undertook to pay all taxes, rates and charges usually paid by a tenant, and
(b) the landlord undertook to bear the costs of the repairs and insurance and other expenses (if any) necessary for maintaining the land in a state to command the rent.
(2) For the purposes of subsection (1) that rent—
(a) is to be taken to be the amount that might reasonably be expected to be so obtained in respect of the letting, and
(b) is to be calculated on the basis that the only amounts that may be deducted in respect of services provided by the landlord are amounts in respect of the cost to the landlord of providing any relevant services.
(3) If the land is of a kind that might reasonably be expected to be let on terms under which—
(a) the landlord is to provide any services which are either—
(i) relevant services, or
(ii) the repair, insurance or maintenance of any premises which do not form part of the land but belong to or are occupied by the landlord, and
(b) amounts are payable in respect of the services in addition to the rent,
the rent to be established under subsection (1) in respect of the land is to be increased under subsection (4).
(4) That rent is to include—
(a) where the services are relevant services, so much of the additional amounts as exceeds the cost to the landlord of providing the services;
(b) where the services are within subsection (3)(a)(ii), the whole of the additional amounts.
(5) In this section “relevant service” means a service other than the repair, insurance or maintenance of the land or of any other land.
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.
For the purposes of this Chapter the persons providing a benefit are the person or persons at whose cost the benefit is provided.
(1) The Treasury may make provision by regulations for exempting from the application of this Chapter such minor benefits as may be specified in the regulations.
(2) An exemption conferred by such regulations is conditional on the benefit being made available to the employer’s employees generally on similar terms.
(1) Sections 212 to 214 supplement the preceding provisions of this Chapter in the following ways—
section 212 provides for certain scholarships provided under arrangements entered into by an employer or a connected person to be regarded as provided by reason of an employment;
section 213 provides that this Chapter does not apply to certain scholarships provided under a trust fund or a scheme;
section 214 provides a different method of determining the cost of an employment-related benefit if it consists in the provision of a scholarship from a trust fund.
(2) Section 215 limits the extent to which section 331 of ICTA (exemption for scholarship income) applies to a scholarship whose provision constitutes an employment-related benefit.
(3) In this section and sections 212 to 215 “scholarship” includes a bursary, exhibition or other similar educational endowment.
(1) A scholarship which is provided for a member of an employee’s family or household is to be regarded for the purposes of this Chapter as provided by reason of the employment if it is provided under arrangements entered into by—
(a) the employer, or
(b) a person connected with the employer.
(2) Subsection (1) applies whether or not the arrangements require the employer or the connected person to contribute directly or indirectly to the cost of providing the scholarship.
(3) A scholarship is not to be regarded as provided by reason of an employment by virtue of subsection (1) if—
(a) the employer is an individual, and
(b) the arrangements are made in the normal course of the employer’s domestic, family or personal relationships.
(4) This section is without prejudice to section 201(3).
(1) This Chapter does not apply to an employment-related benefit consisting in the provision of a scholarship if conditions A, B, C and D are met.
(2) Condition A is that the scholarship would not be regarded as provided by reason of the employment if section 201(3) and section 212 were disregarded.
(3) Condition B is that the holder of the scholarship is a full-time student.
(4) Condition C is that the scholarship is provided from a trust fund or under a scheme.
(5) Condition D is that, in the tax year in which the scholarship is provided, not more than 25% of the total amount of relevant payments is attributable to scholarships provided by reason of a person’s employment.
(6) For the purposes of conditions B and D “full-time student” means a person who is in full-time education at a university, college, school or other educational establishment.
(7) For the purposes of condition D—
“employment” includes any employment within the meaning of the employment income Parts (see section 4), whether or not it is a taxable employment under Part 2;
“relevant payments” means the payments made from the fund or scheme mentioned in condition C in respect of scholarships held by full-time students.
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.
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.
(1) The Chapters of the benefits code listed in subsection (4) do not apply to an employment in relation to a tax year if—
(a) it is lower-paid employment in relation to that year (see section 217), and
(b) condition A or B is met.
(2) Condition A is that the employee is not employed as a director of a company.
(3) Condition B is that the employee is employed as a director of a company but has no material interest in the company and either—
(a) the employment is as a full-time working director, or
(b) the company is non-profit-making or is established for charitable purposes only.
“Non-profit-making” means that the company does not carry on a trade and its functions do not consist wholly or mainly in the holding of investments or other property.
(4) The Chapters referred to in subsection (1) are—
Chapter 3 (taxable benefits: expenses payments);
Chapter 6 (taxable benefits: cars, vans and related benefits);
Chapter 7 (taxable benefits: loans);
Chapter 8 (taxable benefits: notional loans in respect of acquisitions of shares);
Chapter 9 (taxable benefits: disposals of shares for more than market value);
Chapter 10 (taxable benefits: residual liability to charge).
(5) Subsection (1)—
(a) means that in any of those Chapters a reference to an employee does not include an employee whose employment is within the exclusion in that subsection, if the context is such that the reference is to an employee in relation to whom the Chapter applies, but
(b) does not restrict the meaning of references to employees in other contexts.
(6) Subsection (1) has effect subject to—
section 188(2) (discharge of loan: where employment becomes lower-paid),
section 195(3) (discharge of notional loan: where employment becomes lower-paid),
section 199(4) (disposal for more than market value: where employment becomes lower-paid), and
section 220 (employment in two or more related employments).
(1) For the purposes of this Chapter an employment is “lower-paid employment” in relation to a tax year if the earnings rate for the employment for the year (calculated under section 218) is less than £8,500.
(2) Subsection (1) is subject to section 220 (employment in two or more related employments).
(1) For any tax year the earnings rate for an employment is to be calculated as follows—
Step 1
Find the total of the following amounts—
the total amount of the earnings from the employment for the year within Chapter 1 of this Part,
the total of any amounts that are treated as earnings from the employment for the year under the benefits code (see subsections (2) and (3)),
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
in the case of an employment within section 56(2) (deemed employment of worker by intermediary), the amount of the deemed employment payment for the year (see section 54),
excluding any exempt income.
Step 2
Add to that total any extra amount required to be added for the year by section 219 (extra amounts to be added in connection with a car).
Step 3
Subtract the total amount of any authorised deductions (see subsection (4)) from the result of step 2.
Step 4
The earnings rate for the employment for the year is given by the formula—
where—
R is the result of step 3,
Y is the number of days in the year, and
E is the number of days in the year when the employment is held.
(2) Section 216(1) (provisions not applicable to lower-paid employment) is to be disregarded for the purpose of determining any amount under step 1.
(3) If the benefit of living accommodation is to be taken into account under step 1, the cash equivalent is to be calculated in accordance with section 105 (even if the cost of providing the accommodation exceeds £75,000).
(4) For the purposes of step 3 “authorised deduction” means any deduction that would (assuming it was an amount of taxable earnings) be allowed from any amount within step 1 under—
section 346 (employee liabilities),
section 352 (agency fees paid by entertainers),
section 355 (corresponding payments by non-domiciled employees with foreign employers),
section 368 (fixed sum deductions from earnings payable out of public revenue),
section 370 (travel costs and expenses where duties performed abroad: employee’s travel),
section 371 (travel costs and expenses where duties performed abroad: visiting spouse’s or child’s travel),
section 373 (non-domiciled employee’s travel costs and expenses where duties performed in UK),
section 374 (non-domiciled employee’s spouse’s or child’s travel costs and expenses where duties performed in UK),
section 376 (foreign accommodation and subsistence costs and expenses (overseas employments)),
section 377 (costs and expenses in respect of personal security assets and services),
section 713 (payroll giving to charities),
section 592(7) of ICTA (contributions to exempt approved schemes),
section 594 of ICTA (contributions to exempt statutory schemes), or
section 262 of CAA 2001 (capital allowances to be given effect by treating them as deductions).
(1) The provisions of this section apply for the purposes of section 218(1) in the case of a tax year in which a car is made available as mentioned in section 114(1) (cars, vans and related benefits) by reason of the employment.
(2) Subsection (3) applies if in the tax year—
(a) an alternative to the benefit of the car is offered, and
(b) the amount that would be earnings within Chapter 1 of this Part if the benefit of the car were to be determined by reference to the alternative offered exceeds the benefit code earnings (see subsection (4)).
(3) The amount of the excess is an extra amount to be added under step 2 in section 218(1).
(4) For the purposes of subsection (2) “the benefit code earnings” is the total for the year of—
(a) the cash equivalent of the benefit of the car (calculated in accordance with Chapter 6 of this Part), and
(b) the cash equivalent (calculated in accordance with that Chapter) of the benefit of any fuel provided for the car by reason of the employment.
(5) Subsection (6) applies if in the tax year there would be an amount of general earnings consisting of—
(a) earnings within Chapter 1 of this Part, or
(b) an amount treated as earnings from the employment under Chapter 3 (expenses payments) or Chapter 4 (vouchers and credit-tokens) of this Part,
if section 239 or 269 (exemptions in respect of payments or benefits connected with taxable cars etc.) did not apply to the discharge of a liability, or to a payment or benefit, in connection with the car.
(6) The amount of general earnings mentioned in subsection (5) is an extra amount to be added under step 2 in section 218(1).
(7) Section 216(1) (provisions not applicable to lower-paid employment) is to be disregarded for the purpose of determining any amount under this section.
(1) This section applies if a person is employed in two or more related employments.
(2) None of the employments is to be regarded as lower-paid employment in relation to a tax year if—
(a) the total of the earnings rates for the employments for the year (calculated in each case under section 218) is £8,500 or more, or
(b) any of them is an employment falling outside the exclusion contained in section 216(1) (provisions not applicable to lower-paid employment).
(3) For the purposes of this section two employments are “related” if—
(a) both are with the same employer, or
(b) one is with a body or partnership (“A”) and the other is either—
(i) with an individual, partnership or body that controls A (“B”), or
(ii) with another partnership or body also controlled by B.
(1) This section applies if—
(a) an employee is absent from work because of sickness or disability, and
(b) a qualifying sickness payment is made in respect of the employee’s absence from work.
(2) But this section does not apply if the qualifying sickness payment constitutes earnings from the employment by virtue of any other provision.
(3) The qualifying sickness payment is to be treated as earnings from the employment in respect of the period of absence.
(4) If the qualifying sickness payment is made from funds to which the employer and the employer’s employees have made contributions, only the amount of the payment which it is just and reasonable to attribute to the employer’s contributions is treated as earnings under this section.
(5) In this section “qualifying sickness payment” means a payment which meets conditions A and B.
(6) Condition A is that the payment is made—
(a) to the employee or to a member of the employee’s family,
(b) to the order of such a person, or
(c) to the benefit of such a person.
(7) Condition B is that the payment is made—
(a) by reason of the employment, and
(b) as a result of arrangements entered into by the employer.
(1) This section applies if—
(a) an employer is treated by virtue of sections 687, 689 and 693 to 700 as having made a payment of income of an employee (“the notional payment”),
(b) the employer is required by virtue of section 710(4) to account to the Inland Revenue for an amount of income tax (“the due amount”) in respect of the notional payment, and
(c) the employee does not, before the end of the period of 30 days beginning with the date on which the employer is treated as making the notional payment, make good the due amount to the employer.
(2) The due amount is to be treated as earnings from the employment for the tax year in which the date mentioned in subsection (1)(c) falls.
(3) In this section “employer”, in relation to any provision of sections 687, 689, 693 to 700 or 710, means the person taken to be the employer for the purposes of that provision.
It also includes a person who is treated as making a payment of PAYE income by virtue of section 689(2) (payments by person for whom employee works but who is not the employer).
(1) This section applies if in a tax year—
(a) a person (“P”) makes a payment to another person who is employed as the director of a company,
(b) the payment is of, or on account of, earnings from the director’s employment,
(c) PAYE regulations require P to deduct an amount of income tax (“the deductible tax”),
(d) P deducts none, or only some, of the deductible tax, and
(e) either or both of the following occur—
(i) P accounts to the Board of Inland Revenue for some or all of the deductible tax (whether or not P has actually deducted the amount accounted for);
(ii) one or more persons other than P (apart from the director) account to the Board of Inland Revenue for some or all of the deductible tax.
(2) For the purposes of this section it does not matter whether the director’s employment is held at the time when P makes the payment mentioned in subsection (1)(a) so long as it is held at some point in the tax year in which the payment is made.
(3) References in this section to employment as a director accordingly include prospective or past employment as a director.
(4) The deductible tax accounted for to the Board of Inland Revenue is to be treated as earnings of the director from the director’s employment for the tax year in which it is accounted for.
(5) But if—
(a) the deductible tax is accounted for after the director’s employment has ceased, and
(b) the employment ceased in a tax year before the one in which the deductible tax is accounted for,
the deductible tax is treated as earnings for the tax year in which the director’s employment ceased.
(6) The following rules apply to the calculation of the amount to be treated as earnings under this section—
(a) any amount accounted for after the death of the director is to be disregarded;
(b) if P deducts some of the deductible tax, the amount treated as earnings is reduced by the amount deducted;
(c) if the director makes good to P or to another person some or all of the deductible tax which P or the other person accounts for, the amount treated as earnings is reduced by the amount made good.
(7) This section does not apply if the director has no material interest in the company and either—
(a) the director is employed as a full-time working director of the company, or
(b) the company is—
(i) non-profit-making, or
(ii) established for charitable purposes only.
(8) In this section—
“director” has the same meaning as in the benefits code (see section 67);
“director’s employment”, in relation to a person who is employed as a director, means that employment;
“full-time working director” has the same meaning as in the benefits code (see section 67);
“material interest” has the same meaning as in the benefits code (see section 68);
“non-profit-making”, in relation to a company, means that—
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.
(1) Contributions paid by an employer under non-approved personal pension arrangements made by the employee are to be treated as earnings from the employment for the tax year in which they are paid.
(2) Subsection (1) does not apply if or to the extent that the contributions are chargeable to income tax as the employee’s income apart from this section.
(3) For the purposes of this section—
(a) “personal pension arrangements” has the meaning given by section 630(1) of ICTA, and
(b) arrangements are “non-approved” if they are not “approved” within the meaning of that section.
(1) This section applies where—
(a) an individual gives a restrictive undertaking in connection with the individual’s current, future or past employment, and
(b) a payment is made in respect of—
(i) the giving of the undertaking, or
(ii) the total or partial fulfilment of the undertaking.
(2) It does not matter to whom the payment is made.
(3) The payment is to be treated as earnings from the employment for the tax year in which it is made.
(4) Subsection (3) does not apply if the payment constitutes earnings from the employment by virtue of any other provision.
(5) A payment made after the death of the individual who gave the undertaking is treated for the purposes of this section as having been made immediately before the death.
(6) This section applies only where—
(a) the earnings from the employment are general earnings to which any of the provisions mentioned in subsection (7) apply, or
(b) if there were general earnings from the employment they would be general earnings to which any of those provisions apply.
(7) The provisions are—
(a) section 15 (earnings of employee resident, ordinarily resident and domiciled in the UK),
(b) section 21 (earnings of employee resident and ordinarily resident, but not domiciled, in UK, except chargeable overseas earnings),
(c) section 25 (UK-based earnings of employee resident but not ordinarily resident in UK), and
(d) section 27 (UK-based earnings of employee not resident in UK).
(8) In this section “restrictive undertaking” means an undertaking which restricts the individual’s conduct or activities.
For this purpose it does not matter whether or not the undertaking is legally enforceable or is qualified.
(1) In a case where—
(a) an individual gives a restrictive undertaking in connection with the individual’s current, future or past employment, and
(b) valuable consideration that is not in the form of money is provided in respect of—
(i) the giving of the undertaking, or
(ii) the total or partial fulfilment of the undertaking,
section 225 applies as it would if a payment of an amount equal to the value of the consideration had been made instead.
(2) For this purpose—
(a) merely assuming an obligation to make over or provide valuable property, rights or advantages is not valuable consideration, but
(b) wholly or partially discharging such an obligation is.
Income Tax (Earnings and Pensions) Act 2003