SE00570 - Emoluments of employees and office holders: benefits in kind chargeable under Section 19(1)1 - benefits capable of being surrendered to the employer for money

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

The most common way that an employee can turn a benefit in kind into money is by selling it (see SE00540). But that is not the only way. The employee may be able to rent, or hire, the benefit to other people. Or they may have the right, at any time, to give up the benefit altogether in return for a higher cash wage, or salary. In that case, the emolument chargeable under Section 19(1)1 ICTA 1988 is the amount of the wage or salary that would be paid in lieu of the benefit.

In Heaton v Bell (46TC211) an employee was provided with the use of a car by his employer, but an agreed sum was deducted from his wages for that use. He could give up the right to use the car at any time, with the result that the wage he received would be increased. It was held that the use of the car was an emolument chargeable under what is now Section 19(1)1. It could be turned into money by surrendering it.

Nowadays, if the employee is within Part V Chapter II, the car benefit charge under Section 157 ICTA 1988 takes precedence over any potential 'Heaton v Bell' charge under Section 19(1)1, because of the anti-avoidance provision in Section 157A (see SE23300). There is a similar provision in Section 146A as regards the provision of living accommodation.