SE00550 – Emoluments of employees and office holders: benefits in kind chargeable under Section 19(1)1: example

Section 19(1)1 and Section 131(1) ICTA 1988

Wilkins v Rogerson (39TC344)

A company arranged for a tailor to provide some of its employees with a suit, overcoat or raincoat, up to a certain cost. The employees had to order the article that they wanted and the tailor would send the bill to the company for payment. The Revenue argued that the price the company paid for the clothing was chargeable on the employees as an emolument from their employment.

The Court agreed that the clothing was an emolument, but held that the chargeable amount was what the employees could get for it if they sold it (in other words, its second hand value), not the original cost to the company. The second hand value was about a third of what the clothing cost the employer.

[Nowadays, if the employees were within Part V Chapter II, we would be able to charge the full cost. Part of it (equal to the second hand value) would be charged under Section 19(1)1 and the balance under the benefits legislation (see SE21640).]