Preventing liability to charge being removed from certain taxable benefits in kind

22 March 2016

A tax information and impact note (TIIN) has been published which provides further details. The measure is likely to affect individuals who pay for benefits-in-kind they receive, where the taxable value is determined by specific legislative rules (other than the cost to the employer of providing the benefit). And any employer who provides its employees with benefits-in-kind who then pay for the benefit, where the taxable value is determined by specific charging rules other than cost of providing the benefit.

This measure is a technical change to the wording of the legislation to ensure clarity. The measure seeks to clarify in law that the concept of “fair bargain” applies only to general taxable benefits where the taxable amount is based on the cost to the employer of providing the benefit. It does not apply to the taxation of certain benefits in kind which have specific charging rules.

The measure clarifies that the principle of ‘fair bargain’ does not apply to benefits chargeable to income tax within Part 3, Chapter 10 of Income Tax (Earnings and Pensions) Act 2003 (ITEPA 2003). Legislation will be introduced in Finance Bill 2016 to amend ITEPA to put this matter beyond doubt. It will provide a general provision to exclude the application of fair bargain to identified taxable benefits in kind where the level of the benefit is set out in statute.

The changes will apply to Chapter 5 Taxable benefits: living accommodation, Chapter 6 Taxable benefits: cars, vans and related benefits and Chapter 7 Taxable benefits: loans.

The legislation will specifically exclude employees who work for an employer where the employer trades in the provision of hire cars to the public. In the circumstances where the employee hires a car from the employer at the same cost and under the same terms and conditions as any member of the public, there will not be a benefit in kind charge.

This measure will have effect on and after 6 April 2016.

HMRC’s Employment Income Policy Team: can be contacted directly if anyone has any questions about this change: employmentincome.policy@hmrc.gsi.gov.uk