2 |
17A.1 Introduction and Definitions1 |
17A.1.1 Introduction |
One product of Tennant v Smith2 was a substantial amount of tax avoidance. What would otherwise have been remuneration was dressed up as an expense allowance or paid in the form of benefits in kind. Expense allowances were taxable in so far as they exceeded the sums actually spent by the recipient on behalf of his employer,3 but difficult to trace, while benefits in kind, in so far as they could be traced, were taxable only if convertible into money or money’s worth. However, these expenses or allowances were deductible by the employer in computing the profits of the business. To prevent such avoidance special legislation was introduced in 1948 and is now to be found in revised form in ITEPA part 3/TA 1988, sections 153–68.4 The rules also apply to payments to participators in close companies.5 An inspector may issue a notice of nil liability or ‘dispensation’ if satisfied that no additional tax is due;6 this prevents the sections but not other parts of the benefits code from applying. |