6 |
15A.1.3 The Benefits Code and its Role in ITEPA |
Part 3 chapter 1 (section 62) defines earnings. Then part 3 chapter 2, which refers to ‘the benefits code’ stretching over chapters 3 to 11, explains how the benefits code relates to earnings, contains some general rules and provides some definitions. Of the benefits code itself parts 4 and 5 apply to all employees but, as part II explains, parts 3 and 6–10 only apply to directors and employees earning £8,500 or more and so part II explains how one determines whether the taxpayer is a director or is earning at least £8,500. Part 12 is not part of the benefits code at all but provides six types of ‘earnings’, one of which (section 223) concerns only directors and so used to be in the rules for directors and employees earning at least £8,500. |
Section 64 deals with the relationship between the earnings code and the benefits code. If the same benefit comes under both codes it is taxable under the earnings code and any excess under the benefits code. This rule is an improvement on the older and less clear rule. Under section 65 The Revenue have power to give a clearance—known as a dispensation—when satisfied that no tax would be due under these rules; unfortunately the rules referred to are only those in parts 3 and 6–10; there is a separate power to grant a dispensation in respect of matters within parts 4 but neither part 5 or part 12 has such a procedure. |
Sections 66–69 contain definitions of directors, full time working director and material interests in a company. |
| 15A.2 The Convertibility Principle—section 62 and Tennant v Smith |
The convertibility principle forms part of the definition of earnings in section 62, ie part 3 chapter 1; as such it is not part of the ‘Benefits Code’ which means part 3 chapters 3 to 11. Section 62(3) states that money’s worth means something that is (a) of direct monetary value or to the employee or (b) capable of being converted into money or something of direct monetary value to the employee. |