Employment Income: Emoluments |
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14A.3 Money’s Worth—Discharge of Employee’s Obligation: |
The Rule in Nicoll v Austin |
ITEPA section 62(2) refers specifically to (b) any gratuity or other profit or incidental benefit of any kind if it is money or money’s worth and section 63(2) goes on to define money’s worth as being something of direct monetary value to the employee or capable of being converted into money or something of direct monetary value to the employee. Section 62(1)(c) refers to anything else that constitutes an emolument of the employment. It is quite immaterial whether the matters to be discussed should be treated as belonging under one head rather than another but long established case law clearly brings them into (c). |
Payments applied for the benefit of the taxpayer are just as much income as moneys paid directly.44 Where an employer discharges an existing pecuniary obligation of the employee, E, the sum paid is treated as E’s income, even if it is income tax as in Hartland v Diggines. In Hartland v Diggines45 a promise to pay a salary ‘without any deductions and taxes which will be borne by’ the employer was interpreted as an agreement to pay such sums as after deduction of tax gives the net salary after deduction of tax.46 This has been applied equally where employer and E are jointly liable.47 The fact that the employer is under no obligation to make the payments is irrelevant. |
In Nicoll v Austin48 the principle was applied to future obligations. The taxpayer was life director of, and had a controlling interest in, his employing company. Under his contract of service he was to continue to reside in his own house but the company would pay all outgoings in respect of his house, including rates, taxes and insurance, and the costs of gas, electric light, telephone and of maintaining the house and gardens49 in proper condition; however, the house remained the |