EIM00530 - Employment income: benefits in kind taxable as earnings: meaning of 'money's worth'
Section 62(3) ITEPA 2003
An employee may benefit from their employment by receiving a benefit that does not take the form of money. Such profits are often called benefits in kind.
Some benefits in kind count as earnings within section 62 ITEPA 2003. Others may be treated as earnings under the benefits code. In most cases, the benefits code only applies to benefits that are not otherwise chargeable to tax. So, if a benefit is fully taxable as earnings under section 62 (because it represents money’s worth - see below), the benefits code will not apply.
Exceptions from the general rule
There are 4 provisions in the benefits code that take priority over section 62. They are:
Item | Section |
---|---|
Non-cash vouchers | Sections 82 to 89 ITEPA 2003 |
Credit tokens | Sections 90 to 94 ITEPA 2003 |
Living accommodation provided | Sections 97 to 113 ITEPA 2003 |
Cars made available | Sections 120 to 148 ITEPA 2003 |
Meaning of ‘money’s worth’
Benefits that are money’s worth count as earnings under section 62 ITEPA 2003. Section 62(3) defines ‘money’s worth’ as:
- something that is of direct monetary value to the employee, or
- something that is capable of being converted into money or something of direct monetary value to the employee
This definition preserves the 2 aspects of money’s worth that were previously derived from case law. The law has not been changed. As before, a benefit is taxable as earnings if:
- it is capable of being turned into money in the employee’s hands (see EIM00540 to EIM00570), or
- it consists of the discharge of an employee’s debt