The special benefits charge imposes a charge to Income Tax where
a director or employee receives a special benefit by virtue of
owning shares, or having an interest in shares, which they acquired
within FA88/S77 (1) – see
ERSM91000.
The section only applies if the benefit is not otherwise
chargeable to Income Tax. Although it was designed to tax
manipulated benefits, it can also apply in circumstances where
employee shareholders are treated particularly favourably for
commercial reasons.
The charge to tax is made for the year of assessment in which
the benefit is received and is on an amount equal to the value of
the benefit - FA88/S80 (4).
On 1 January 2000 an employee acquires 500 shares in a company
at a cost (which is their market value) of £2 per share.
On 1 January 2002 the employee is given a bonus issue of 1
for 10 shares (50 shares) which have a market value of £3
each. No other shareholder receives any shares.
There is a charge under Schedule E on the market value of
£150 (50 x £3).
The section does not define the meaning of the word 'benefit'. A
benefit might take the form of bonus or rights issue shares, of
cash, of vouchers or tokens exchangeable for goods or services, or
of any form of shareholder 'perk'.
It is important to note that most benefits received by
employee shareholders would not be 'special benefits' within
FA88/S80. This is because either they are chargeable to Income Tax
under some other provision, or the benefit is specifically exempted
from being a special benefit.
The exemption conditions are set out in
ERSM91020.
