SE00580 - Emoluments of employees and office holders: benefits in kind chargeable under Section 19(1)1 - employer paying employee’s debt - the pecuniary liability principle

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

The discharge of an employee's debt by the employer represents money's worth received by the employee. It is therefore an emolument (see SE00520) and it is chargeable under Section 19(1)1 ICTA 1988 if it comes from the employment (see SE00600 onwards). This is often called the 'pecuniary liability' principle.

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.

As regards:

• cases where the employer pays the employee’s council tax, see SE00585
• the operation of PAYE in pecuniary liability cases, see SE00590.