伊人直播

Sections 62, 70(1)(b) and 201(2) ITEPA 2003, Part 7A ITEPA 2003

Expenses payments and benefits made or provided by someone other than the employee鈥檚 employer are often called 鈥渢hird party benefits鈥�.

Such payments and benefits are within the rules in the benefits code (EIM20006) where they are made or provided 鈥渂y reason of the employment鈥� (EIM20501) under the normal meaning of those words. But they are not chargeable under those rules if they are otherwise chargeable as earnings, for example, under Section 62 ITEPA 2003. Examples of benefits which are chargeable as earnings are at EIM00530 onwards. Nor are they chargeable under those rules if they are chargeable under Part 7A ITEPA 2003 (Employment income provided through third parties - see EIM45000 onwards and EIM45705).

However, note that in order to come within the scope of Part 7A there must be a 鈥渞elevant step鈥� and the provision of a benefit will not necessarily fall within any of the defined types of 鈥渞elevant step. See EIM45055.

In addition, note that as long as there is no tax avoidance involved, relevant steps taken by members of the same group of the companies as the employer are generally excluded from the application of Part 7A - see EIM45035

Interaction of 鈥渂y reason of the employment鈥� with Section 62 ITEPA 2003

It is important to understand the distinction between Section 62 on the one hand, and Sections 70(1) and 201(2) on the other hand. Section 62(1) applies to earnings 鈥渋n relation to an employment鈥�, including anything that is an 鈥渆molument of the employment鈥� (Section 62(2)(c)). Section 70(1) and Section 201(3) apply to expense payments and benefits provided 鈥渂y reason of the employment鈥�. Section 62 is based on what was previously Section 19 ICTA 1988, which charged to tax emoluments 鈥渇rom an employment鈥�. Case law shows that the phrase 鈥渂y reason of the employment鈥� has a wider meaning than 鈥渇rom the employment鈥� (EIM00600). The words 鈥渇rom the employment鈥� are not reproduced in Section 62 but earnings chargeable under that section include emoluments 鈥渙f the employment鈥� and in this context 鈥渙f the employment鈥� has the same meaning as 鈥渇rom the employment鈥�.

Case law guidance: by reason of the employment

In Wicks v Firth (56TC338) Lord Denning said that 鈥渂y reason of the employment鈥� covered cases where an employee would not have received a benefit unless he had been an employee. The employment must be one of the causes of the benefit being provided. It need not be the sole cause or even the main one. But it must be an operative cause in the sense that it was a condition of the benefit being granted.

In the same case Lord Oliver said that the question to ask is 鈥渨hat is it that enables the person concerned to enjoy the benefit?鈥� If the answer to that question properly includes 鈥渢he employment鈥� as one of the factors then that is 鈥渂y reason of鈥� the employment.

In Mairs v Haughey (66 TC 273) Lord Chief Justice Hutton preferred Lord Oliver鈥檚 way of expressing the test. In particular where the employment was only an incidental factor in past history, and not a current reason for the benefit being provided, his view was that did not amount to 鈥渂y reason of employment鈥�.

These judicial comments were given as general observation and whilst they carry weight they are not a legally binding restriction on the meaning of the words 鈥渂y reason of鈥�. In practice you can normally assume that a benefit which is provided by someone other than the employer and which is plainly connected with the employee鈥檚 employment has been provided by reason of the employment.

However some third party benefits, small gifts and entertaining, are exempt from tax.