A benefit counts as earnings under Section 62 ITEPA 2003 if it
is money's worth. Money's worth includes things that are of direct
monetary value to the employee (see
EIM00530).
An example of this is where the employer pays a debt that the
employee owes to a third party. This is often called the pecuniary
liability principle. The employer's payment is of direct monetary
value to the employee because he or she no longer has to pay that
amount of money to the third party. It therefore counts as money's
worth under Section 62(3)(a) ITEPA 2003. It will be taxable as
earnings if it comes from the employment (see
EIM00600).
An employer discharges an employee's debt when he or she pays
a bill for goods or services direct which in law is the liability
of the employee. The employer bears the employee's pecuniary
liability. It does not matter for tax purposes whether the employer
makes the payment voluntarily or under a contract.
For example, if an employee has signed the application form
for the supply of electricity or gas to her home, the employee is
the customer and she will be the person who is billed. If the
employer pays the bills for the employee the employer is
discharging the employee's debt.
The principle was applied in the following cases in respect
of the expenses shown.
| Circumstance
| Tax case
|
| Employee's income tax | Hartland v Diggines (10TC246) |
| Employee's rates, lighting, heating and other costs | Nicoll v Austin (19TC351) |
| Cost of employee's petrol | Richardson v Worrall (58TC642) |
As regards:
