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HMRC internal manual

Business Income Manual

Specific deductions: employee benefit trusts: general-purpose EBTs: timing of deductions for contributions: qualifying benefits

S40 Income Tax (Trading and Other Income) Act 2005, S1292 Corporation Tax Act 2009

The general rule is that a qualifying benefit is a payment of money (not a loan, but see below regarding relevant steps), or the transfer of ownership of an asset, the amount or value of which:

  • is chargeable to Income Tax, on the recipient or someone else, and
  • gives rise to a liability to pay Class 1, 1A or 1B National Insurance Contributions (or would do if the amounts were above the primary or secondary thresholds for paying NICs).

There are two main exceptions to this general rule. Payments of money and transfers of assets in the following circumstances are also ‘qualifying benefits’:

  • where the payment or transfer is made in connection with the termination of the recipient’s employment, regardless of whether it gives rise to an Income Tax charge or NICs liability, or
  • where there is no Income Tax charge or NICs liability on the money or assets received because the employee works outside the UK.

A ‘relevant step’ within the meaning of the disguised remuneration legislation in Part 7A Income Tax (Earnings and Pensions) Act 2003 is also a qualifying benefit if the value of the step counts as employment income. This can include the making of a loan. See BIM44636.