36

Endnotes

¹ Inland Revenue practice is explained in Booklet IR 480 (latest ed 2002).
² [1892] AC 150, 3 TC 158. See above §15A.2.
³ Such sums escaped tax only if they were deductible under the rules in ITEPA part 5 ch 2 TA 1988, s 198 or 201.
⁴ Before 1976 certain employments were exempt, notably charities and non-trading bodies such as the civil service and trade union The present legislation draws no such distinctions. The abolition of these exemptions had been recommended by the Royal Commission, Cmd 9474 (1955), §221; charities and non-profit making bodies are still distinct in that a director of such a body may be treated as an employee and not a director (ITEPA s 216(3) TA 1988, s 167(5); the same rule applies to living accommodation ITEPA s 99(3) see also s 99(3) TA 1988, s 145(5) (above §15.4).
⁵ Ibid, s 418; see text at p 284.
⁶ ITEPA s 65 TA 1988, s 166.
⁷ ITEPA s 216, ex TA 1988, s 167(1). On travelling expenses note ESC A4.
⁸ The use of a fixed sum was criticised as arbitrary by the Royal Commission, above at n 4, §220; however, the combination of a fixed sum and the passage of time has worked wonders for the Revenue.
⁹ FA 1978, s 23, with effect from 1979–1980.
¹⁰ HC Written Answer, 10 November 1992, (1992) Simon’s Tax Intelligence 975.
¹¹ ITEPA s 67 and 68, ex TA 1988, s 168(8), (9).
¹² R v Allen [1999] STC 846.
¹³ ITEPA s 216(3), ex TA 1988, s 167(5).
¹⁴ Ibid, s 216, ex s 167(5).
¹⁵ Ibid, s 67(3), ex 168(10).
¹⁶ Ibid, s 68, ex 168(9)–(11); shares held by associates are included. ‘Participator’ is defined in TA. 1988, s 417(1).
¹⁷ On application where there is a car benefit under a salary sacrifice scheme, see Ibid, s 219, ex 167(2B)–(2D).
¹⁸ Ibid, s 218(1), ex 167(2). The Revenue claims that the purpose of this last rule is to maintain equity between one who is paid a gross salary out of which deductible expenses are met and another who receives a lower salary but separate reimbursements of deductible expenses This claim is unsound since equity could be achieved equally well by allowing both persons to deduct their expenses, and because it creates inequity between these persons and a third person who receives a lower salary but who incurs no deductible expenses because his employer meets them directly.
¹⁹ Under Ibid, s 65, ex 166.
²⁰ Ibid, s 218(4), ex s 167(1)(b), 171, 202.
²¹ Ibid, s 220, ex 167(3).
²² See ESC A61 under which the reimbursed expenses of certain living costs of members of the clergy does not apply if a member earns £8,500 p.a. or more—now ITEPA s 290.
²³ ITEPA s 70. See Jennings v Kinder [1958] 1 All ER 369, 38 TC 673.
²⁴ ITEPA s 71. All sums paid by the employer are treated as paid by reason of the employment unless the employer is an individual and the payment made in the normal course of the employer’s domestic family or personal relationships.
²⁵ ITEPA s 72—unless another head of charge applies s 70(5).
²⁶ S 153 thus sweeps in reimbursements of expenses actually incurred even though, under Owen v Pook [1969] 2. All ER 1, 45 TC 571 (above at §14.4.2) they are not technically emoluments (see Royal Commission above at n 4, §226).
²⁷ ITEPA s 72(3). The burden of proof rests on the taxpayer to show that the expense comes within these provisions (McLeish v IRC (1958) 38 TC 1). On reimbursement of fees for solicitors practising certificates, see a statement by the Law Society, 24 February 1993, (1993) Simon’s Tax Intelligence 341.
²⁸ ITEPA s 70(3) and (4).
²⁹ ITEPA s 70(2), ex TA 1988, s 153(3).
³⁰ The effect of this extension on s 218(1) step (b) ex 167(2)(b) (see above) is to make almost any employee with financial responsibility subject to these rules.
³¹ Inland Revenue Booklet IR 480, §2.
³² ICAEW Memorandum TR 786, (1990) Simon’s Tax Intelligence 205.
³³ ITEPA s 203, ex TA 1988, s 156(1).
³⁴ Ibid, s 204, ex s 154(3).
³⁵ Ibid, s 203(2). If the employee pays a sum equal to the cost of providing the benefit he escapes s 154 even though the market value is higher. Quaere whether a tenant paying a full market rent thereby ‘makes good’ to the lessor any sums spent by the lessor even though those sums exceed the rent. See Luke v IRC [1963] 1 All ER 655, 578, 40 TC 630, per Lord Reid but contrast Lord Guest at 586, 652.
³⁶ Mairs v Haughey [1992] STC 495, 66 TC 273, CA NI.
³⁷ ITEPA ss 201(2) and 202. In Wicks v Firth [1983] STC 25, 56 TC 318 the House of Lords held that although a scholarship awarded to the taxpayer’s child by his employer was a benefit provided to the taxpayer by reason of his employment, it was exempt under TA 1988, s 331 as scholarship income. However, the effect of this decision has been reversed by what is now ITEPA s 212, ex TA 1988, s 165 (see below at §17A.4.8).
³⁸ Ibid, ss 62(1) and (2); living accommodation in ch 5 has its own rule in s 109; there are also special rules for loans see 193 and 194 and s 64(5) and (6).
³⁹ Ibid, s 201(3), ex TA 1988, s 168(3); quaere whether this can apply if the business is owned by a trust so that the trustees are the employer and a benefit is provided under the trust. This provision did not apply in Mairs v Haughey [1992] STC 495, 66 TC 273, CA NI (where the court said that a payment which was not caused by the employment could not have been paid by reason of the employment) because the payment was not made by the employer.
⁴⁰ Ibid, s 209.
⁴¹ [1983] STC 25, 31, 56 TC 318, 363, per Lord Templeman; see Shipwright [1983] BTR 254.
⁴² As in Mairs v Haughey [1992] STC 495, 66 TC 273.
⁴³ [1982] STC 76, 80, 56 TC 318, 338, per Lord Denning MR. This point was left open by the House of Lords: see Lord Templeman [1983] STC 25, 32, 56 TC 318, 364.
⁴⁴ [1964] 2 All ER 464, 466, 41 TC 641, 655.
⁴⁵ If E can escape tax by not using the Cup Final ticket (unless caught by convertibility), R might, of course, choose to dismiss E for such ingratitude.
⁴⁶ ITEPA s 201(2); on old law see TA 1988, s 168(4). E will be chargeable if the gift is to E’s child.
⁴⁷ [1964] 2 All ER 464, 41 TC 641; on apportionment, see below at §17A.4.
⁴⁸ Mairs v Haughey [1992] STC 495, 66 TC 273, CA NI. This point was not argued before the House of Lords.
⁴⁹ Such discrimination is ruled out by Donovan LJ in Butter v Bennett (1962) 40 TC 402, 414.
⁵⁰ Presumably the test of occupation is that under the pre-1977 law and not that in TA 1988, s 145 (see above at §15A.3).
⁵¹ ITEPA s 316; formerly TA 1988, s 155ZA added by FA 2000 sch 27, para 10 and superseding TA 1988, s 155(2). Non-work use includes family use.
⁵² Ibid, s 316(5), ex TA 1988, s 155ZA(5).
⁵³ Ibid, s 307(1), ex 155(4).
⁵⁴ Ibid, s 325, ex 155(6).
⁵⁵ Ibid, 265, ex s 155(7).
⁵⁶ Ibid, ss 240(2) and 241, ex s 155(1B), (1C); the rules in ex s 200A apply.
⁵⁷ Ibid, s 202(1)(a) (note also (b) and (c)), ex 154(2).
⁵⁸ Ibid, s 244, ex s 197AC, added by FA 1999, s 50 (see below at §18.2.6).
⁵⁹ Ibid, s 242 and 243, ex 197AA, 197AB, added by FA 1999, s 48 (see below at §18.2.6).
⁶⁰ TA 1988, s 159A; on apportionment, see subss (4)–(6); for definitions, see subs (8).
⁶¹ Ibid, s 319, ex s 155A(a).
⁶² See Wicks v Firth [1983] STC 25, 56 TC 318, HL; see Shipwright [1983] BTR 254. The particular exemption in that case (TA 1988, s 331) has now been the subject of special legislation (see below at §17A.4.8) but the principle remains, unless the House of Lords follows its own (bad) precedent in Thomson v Moyse (see below at §60.3).
⁶³ Ibid, s 261 ex TA 1988, s 197G.
⁶⁴ ESC A67, A6.
⁶⁵ Ibid, s 318 ex TA 1988, s 155A; a ‘child’ is a person under 18, and ‘care’ is defined as including supervised activities (s 318(8) 155A(7)). See, generally, RI 181.
⁶⁶ Ibid, s 318(3). Defined by reference to the Children Act 1989, s 3(1) (s 155A(8)).
⁶⁷ Ibid, ex s 155A(3), (7).
⁶⁸ Ibid, s 318(4)–(7) ex s 155A(2), (4), (5).
⁶⁹ Ibid, ss (4) and (5). Ibid, s 155A(6).
⁷⁰ Ibid, s 320, original provision TA 1988, s 156A(3); s 156A was added by FA 1999, s 45.
⁷¹ Ibid, s 320(7), ex TA 1988, s 156A(4), (5).
⁷² Ibid, 320(3), ex s 156A(1)(c), (2).
⁷³ Ibid, s 320(2), ex Ibid, s 156A(1)(b).
⁷⁴ Ibid, s 204.
⁷⁵ [1992] STC 898, 65 TC 421; criticised by Bennion [1995] BTR 325. For wider criticisms, see §3.1.3 above.
⁷⁶ On practical consequences, see Inland Revenue Press Release, 21 January 1993, (1993) Simon’s Tax Intelligence 196.
⁷⁷ ITEPA s 326. On previous concession see Inland Revenue Press Release, 27 April 1994, (1994) Simon’s Tax Intelligence 581.
⁷⁸ Ibid, s 206(3).
⁷⁹ ITEPA s 205, ex TA 1988, s 156(4), eg repair and insurance.
⁸⁰ Ibid, ss 205(3) and 207.
⁸¹ Ibid, s 205(3), ex 156(5); the percentage was 10% where the asset was first provided before 6 April 1980.
⁸² Luke v IRC [1963] 1 All ER 655, 40 TC 630 (see below at p 302).
⁸³  ITEPA s 206(2), ex TA 1988, s 156(3); transaction costs incurred by the transferor are ignored (Ibid).
⁸⁴ Ibid, s 206(3).
⁸⁵ Ibid, s 206(5), ex 156(4).
⁸⁶ [1969] 3 All ER 564, 45 TC 467.
⁸⁷ But see Ibid, Sachs LJ, 571, 493.
⁸⁸ 45 TC 487.
⁸⁹ [1964] 2 All ER 464, 467, 41 TC 641, 659; this distinction is criticised by Kerridge [1986] BTR 36.
⁹⁰ ITEPA s 114–120, ex TA 1988, s 157(1).
⁹¹ ITEPA s 169 enacting ESC A71.
⁹² ITEPA s 121(1), Step 4; on Treasury power to increase this figure see s 170, ex TA 1988, s 168G.
⁹³ ITEPA s 148 ESC A71; on which, see Taxation (1998), Vol 142, No 3676.
⁹⁴ See above at §15.2.1.
⁹⁵ ITEPA s 121.
⁹⁶ Ibid, ss 135 and 136.
⁹⁷ Introduced by FA 2000 sch 11. The notes to the Finance Bill 1999 suggested that 300 million extra business miles were driven.
⁹⁸ Ibid, s 139.
⁹⁹ Ibid, s 141.
¹⁰⁰ Ibid, s 137.
¹⁰¹ Ibid, s 138.
¹⁰² Ibid, s 140.
¹⁰³ Ibid, s 142.
¹⁰⁴ Ibid, s 144 TA 1988, sch 6, para 7.
¹⁰⁵ Brown v Ware [1995] STC (SCD) 155; E cannot deduct tax paid under ss 120, 157 as a travelling expense under ss 338, 198 (Clark v Bye [1997] STC 311).
¹⁰⁶ IRC v Quigley [1995] STC 931.
¹⁰⁷ ITEPA s 132.
¹⁰⁸ ITEPA s 239.
¹⁰⁹ Ibid, s 239(4), ex TA 1988, s 155.
¹¹⁰ Ibid, s 157.
¹¹¹ Statement of Practice SP 5/88.
¹¹² Ibid, ss 122–124, ex TA 1988, s 168A(1), (2), (9); on timing of availability, see ex s 168A(12); on date of first registration, see ex s 168(5)(d).
¹¹³ Ibid, s 124, ex ibid, s 168A(8).
¹¹⁴ The rules on accessories are set out in ITEPA ss 125–131, ex s 168A(11); see HC Official Report, Standing Committee D, cols 197–202, (1995) Simon’s Weekly Tax Intelligence 267. Note s 125(2), ex 168A(11), defining accessories (but excluding a mobile phone, equipment for a disabled person to drive a car and conversion to LPG); s 168A(10), defining qualifying accessories; and s 125(4), ex 168A(9)(c), (d), distinguishing standard accessories from optional accessories.
¹¹⁵ Ibid, s 125(2), ex TA 1988, s 168A(9)(b), (c).
¹¹⁶ Ibid, ss 127–129, ex 168A(4), (5), 168B(2)–(4).
¹¹⁷ Ibid, s 131, ex 168B(6), (7), 168B(2), (3).
¹¹⁸ Ibid, ss 125(2)(c) and 172, ex 168AA.
¹¹⁹ Ibid, s 126(3), ex s 168C.
¹²⁰ Ibid, s 132, ex TA 1988, s 168D.
¹²¹ Ibid, s 147, ex 168F(1).
¹²² Ibid, s 147(2), ex 168F(2)–(4).
¹²³ Ibid, s 147(5)–(7), ex 168F(5)–(11).
¹²⁴ Ibid, s 167, ex 159.
¹²⁵ Ibid, s 154–166, ex 159AA.
¹²⁶ Ibid, s 157(1) step 2 and 166, ex sch 6A, para 1.
¹²⁷ Ibid, s 158, ex sch 6A, para 2.
¹²⁸ Ibid, s 159, ex sch 6A, para 3.
¹²⁹ Ibid, s 115(1), ex 168(5A); see Inland Revenue Press Release, 16 March 1993, para 3, (1993) Simon’s Tax Intelligence 437.
¹³⁰ Ibid, s 238, ex TA 1988, s 159AC(1).
¹³¹ Ibid, ss 160–164, ex sch 6A, pt II.
¹³² Ibid, s 164, ex sch 6A, para 8.
¹³³ Ibid, s 150.
¹³⁴ Ibid, s 151.
¹³⁵ Ibid, s 152; the difference between s 152(2)(c) and s 151 is subtle and may be even illusory.
¹³⁶ Ibid, s 153.
¹³⁷ ITEPA s 219, Ring [1982] BTR 140.
¹³⁸ On practical problems, see ICAEW Memorandum TR 738, (1998) Simon’s Tax Intelligence 738. On advances to meet necessary expenses, see ITEPA s 179.
¹³⁹ ITEPA s 181.
¹⁴⁰ West v Crosland [1999] STC (SCD) 147.
¹⁴¹ ITEPA s 173(2)(b), ex TA 1988, s 160(5)(c).
¹⁴² Ibid, s 173(2)(a), Williams v Todd [1988] STC 676, 60 TC 727.
¹⁴³  Harvey v Williams [1995] STC (SCD) 329; and Gold v Inspector of Taxes [1998] STC (SCD) 215 (the loan was secured on the house). The facts as reported assume that the house would go up in value; whether the lender would bear a share of any loss if the house had gone down in value is not clear.
¹⁴⁴ [1999] STC 330.
¹⁴⁵ Stephens v T Pittas Ltd [1983] STC 576 (see below at §51.4).
¹⁴⁶  ITEPA s 174 note especially in the present context subss (5)–(7).
¹⁴⁷ Ibid, s 174(6), ex TA 1988, s 160(6).
¹⁴⁸ Ibid, s 174, (5)(b), ex s 161(4).
¹⁴⁹ Ibid, s 180, ex 161(1).
¹⁵⁰ Ibid, s 176, ex 161(1A), (1B). On Revenue practice, see Revenue interpretation RI85.
¹⁵¹ Ibid, s 177, ex 161(2); on pre-1978 loans, see s 161(3).
¹⁵² Ibid, s 190(1)(a), ex 161(6)(a).
¹⁵³ This point is the stronger because s 188, ex 160(2) is expressly made to apply after the employment has ceased.
¹⁵⁴ Ibid, s 178, ex TA 1988, s 160(1C).
¹⁵⁵ Ibid, s 180(1), ex 161(1)(b).
¹⁵⁶ Ibid, s 184(2)–(5), ex 160(1A); they are treated as paid at the end of the year or trading period or, if earlier, the end of the employment.
¹⁵⁷ Ibid, s 184(2).
¹⁵⁸ Ibid, s 184(4).
¹⁵⁹ Ibid, s 184(5).
¹⁶⁰ Ibid, s 184(3).
¹⁶¹ Quaere the position of a fixed-interest loan if the interest was paid at the official rate when the loan was made but not when E becomes the employee.
¹⁶² ITEPA 148(2)(b) and (3), ex TA 1988, s 160(1). The payment is ‘for’ the year and so does not have to be paid during the year.
¹⁶³ Ibid, s 175(4).
¹⁶⁴ Ibid, s 191.
¹⁶⁵ Ibid, s 182, ex TA 1988, sch 7, para 4.
¹⁶⁶ Ibid, s 183, ex sch 7, para 5; on Revenue practice, see Inland Revenue leaflet IR480, §17A.2.5.

¹⁶⁸ Ibid, s 186, ex TA 1988, sch 7, para 4(2)–(4), originally added by FA 1995, s 45.
¹⁶⁹ SI 1989/1297, as amended by SI 1991/889; (1989) Simon’s Tax Intelligence 695 and (1991) Simon’s Tax Intelligence 434.
¹⁷⁰ SI 1999/419; (1999) Simon’s Weekly Tax Intelligence 529.
¹⁷¹ Ibid, s 181(2), ex TA 1988, s 160(5), words added by FA 1994, s 88(2).
¹⁷² Taxes (Interest Rate) Regulations 1989 para 5 (SI 1989/1297 as amended). The average official rates have for many years been 3.9 and 5.5%, respectively (Inland Revenue Press Release, 9 April 1998, (1998) Simon’s Weekly Tax Intelligence 604).
¹⁷³ ITEPA s 188(2), ex TA 1988, s 160(2).
¹⁷⁴ Ibid, s 188(5)(b); in this case the loan is not employment-related.
¹⁷⁵ Ibid, s 189 161(5).
¹⁷⁶ Ibid, s 190(2), ex 161(6)(b).
¹⁷⁷ Ibid, s 188(2), ex 160(3).
¹⁷⁸ Ibid, s 188(3), ex 160(3A), added by FA 1995, s 45(3).
¹⁷⁹ ITEPA s 99(3)–(5); ESC A61 does not apply to clergymen earning over £8,500 p.a.
¹⁸⁰ Including repairs which would be the landlord’s responsibility under a lease within the Landlord and Tenant Act 1985, ss 11, 16, 36.
¹⁸¹ [1963] 1 All ER 655, 40 TC 630; FA 1976, s 62(5).
¹⁸² This was the line taken by Lord Guest, Lord Pearce and by Lord Reid (‘this is a case of any port in a storm’, 665, [1963] 1 All ER 655, 40 TC 630, 646) and by Lord Dilhorne, 661, 643. The consequence of the repair will be an increase in the annual value of the premises. To hold that the expense of repair did not fall within s 156(5) and then to increase the annual value would be a flagrant case of double taxation.
¹⁸³ See, however, Luke v IRC, above, on the forerunner of s 154.
¹⁸⁴ ITEPA s 223, ex TA 1988, s 164.
¹⁸⁵ Ibid, s 223(6), ex s 164(3).
¹⁸⁶ Ibid, s 223(7), ex 164(2).
¹⁸⁷ Ibid, s 165.
¹⁸⁸ [1983] STC 25, 56 TC 318 (see above at §17A.1).
¹⁸⁹ ITEPA s 214.
¹⁹⁰ ITEPA s 212.
¹⁹¹ ITEPA s 213180 TA 1988, s 165(3).

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