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HMRC internal manual

Employment Income Manual

HM Revenue & Customs
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Employment income: money's worth: benefits capable of being turned into money

Section 62(3) ITEPA 2003

Things of direct monetary value to the employee

A cheque is not money but it can readily be converted into money by the employee at the amount for which it is made out. It is money’s worth (see EIM00530). So for all practical purposes a cheque payment can be treated as a money payment. The same goes for National Savings Certificates. Both can be cashed by the employee at face value and that is the amount that is treated as earnings by Section 62(3) ITEPA 2003.

Things that are capable of being converted into money

But an employer may give an employee something that is not capable of being turned into money at face value. In that case, the amount that is treated as earnings under Section 62(3)(b) ITEPA 2003 is the amount that the employee could get for the item if he or she were to dispose of it as soon as it came into their possession. That is, its second-handvalue (see example EIM00550).

[There is an exception to this rule. That is where a benefit is obtained by means of a voucher or credit token. Then the chargeable amount is the cost of providing the voucher or token and the money, goods or services for which it is capable of being exchanged (see EIM16010 onwards).]

Sometimes, the employee pays the employer for the item he or she has received. If the amount paid is equal to or greater than the value of the item there is no tax charge on the employee. But if the amount paid is less than the second-hand value of the item in question the difference is taxed as earnings under Section 62 (see example EIM00560).

As regards the transfer of land and houses to employees see EIM08001.