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HMRC internal manual

Employment Income Manual

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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 (see EIM00520). Others may be treated as earnings under the benefits code (see EIM00513). 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 four provisions in the benefits code that take priority over Section 62. Theyare:

Non-cash vouchers Sections 82 to 89 ITEPA 2003 EIM16020
     
Credit tokens Sections 90 to 94 ITEPA 2003 EIM16020
Living accommodation provided Sections 97 to 113 ITEPA 2003 EIM11300
Cars made available Sections 120 to 148 ITEPA 2003 EIM23000

Meaning of money’s worth

Benefits that are money’s worth count as earnings under Section 62 ITEPA 2003. Section62(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 two 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 (see EIM00580).