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Benefits Code II: Not Low Paid Employees |
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cover the marginal cost to the school but was substantially less than the average cost paid by other pupils. The House held that marginal cost should be used; since this had all been ‘made good’ by the employee, no charge arose.76 |
The decision of the House was in accordance with what was thought to be general Revenue practice and, famously, what had been said to the House of Commons in 1975 (on which see chapter 3). However, the issue is not easy to resolve. Suppose that an airline provides an employee with a free seat on a flight from London to New York. One view, not canvassed in Pepper v Hart, is that cost means opportunity cost, ie that if the airline could have sold the seat to an ordinary passenger at £500, it would have had an opportunity cost of £500, but it forewent the opportunity of making that sum. It is generally thought that such a cost is not ‘incurred’. The second view, marginal cost, means the extra cost of carrying this passenger, ie the cost of providing another meal together with the amount of fuel needed to carry the extra weight. Of course, it might also entail a very large sum, eg if regulations required that another member of the cabin staff had to be hired. Matters are unclear if two employees were given the free flight but the extra member of staff was triggered by only one of them. The third view, the average cost, would mean that the airline must average the entire cost of the journey over all the passengers. However, this cost would itself be a matter of dispute since it is necessary to consider how much of the overhead cost should be included, ie should it be: (a) the marginal cost to the airline of running the flight, so spreading the cost over the number of passengers on the flight (a matter of some interest if, for example, the employee were the only passenger on the flight); or (b) the appropriate proportion of the cost of the entire operations of that month (or year), so treating the employee as receiving a benefit far higher than the normal fare? At present, the matter would be resolved in favour of marginal cost so that if no expense is incurred in providing the benefit, no charge can arise under chapter 10. |