Benefits Code I and Exemptions and Exclusions

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15A.2.4    Extent of Liability

Convertibility provides the test not only of liability but also of its extent. In Weight v Salmon³⁰ the employee was given the right to apply for shares at less than market price and was held assessable on the difference between the market price and the price he paid. In Wilkins v Rogerson³¹ the employee was provided with a suit; he was held assessable on the second hand value of the suit, which was only one-third of the purchase price, a fact which involved ‘no reflection on the tailor’ because ‘it is notorious that the value of clothing is very much reduced the moment that it can be called second hand’. The value is ascertained at the date when the asset comes into charge, usually on receipt.³² Although a special rule now applies to certain share options, other options are subject to the general rule. If an asset is received in non-convertible form but later becomes convertible, there is little reason why a charge should not arise at the later time.

15A.2.5    Anomalies and Distinctions

The test of convertibility gives rise to distinctions which mean significant variations in tax liability according to fiscal skill or simple luck.

1. Whereas the provision of a benefit such as a board and lodging escapes tax, the payment of an allowance in lieu of providing that benefit does not. In Fergusson v Noble³³ the taxpayer, a plain clothes policeman, was allowed to buy his own clothes suitable for duty and was given an allowance of £11.71. Uniformed members of the police force were provided with a uniform free of charge. It was held that the allowance was liable to tax. On similar reasoning an employee who

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