4 |
for £1,200 tax, plus interest and penalties, for an all-expenses paid trip to a sunshine paradise. Employers may pay the tax themselves, but they may simply fold arms and provide the Revenue with details of the benefit supplied—especially if the employee has subsequently left. In such circumstances, any exemption from PAYE and NIC was very important. The Revenue has an Incentive Valuation Unit to tax such benefits. |
Current figures5 show that cars were responsible for 53% of the total tax raised by the rules on benefits in kind. Other figures included car fuel (9%), private medical and dental insurance (8%) and transferred assets (4%). The total tax raised was £3.22 bn. |
Valuation difficulties may, however, prove too great. The current rules introduced in 1988 systematically exclude any tax charge for the provision of a parking space (now ITEPA section 237). This was done in return for doubling the tax charge for the car itself. Valuing parking spaces had proved to be an administrative nightmare, eg where a company uses space in its otherwise unused basement. Fixed scales also gave rise to problems since a farmer parking in an empty field in Lanarkshire would pay as much as a city commuter.6 |
15A.1.2 Tax Rule Choices |
The general schedule E principle that money’s worth is income also applies to benefits in kind—but with difficulty. Where an employer, R, provides an employee, E, with a benefit in kind, any tax system encounters two sets of problems. The first is to define the benefits to be taxed; the second is to value them. On the first point, rules are needed to prevent a tax charge arising simply because an employer provides an office or staff support—or a better office or better support. The system, if it is of a puritanical disposition, may also have to consider at what point an office becomes so luxurious that it should be treated as a chargeable benefit. On the second point, the system provides three principal choices. (1) The most obvious choice, but also the most |