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HMRC internal manual

Employment Income Manual

Employment income: benefits in kind treated as earnings under Section 62 ITEPA 2003: example

Section 62(3)(b) ITEPA 2003

Wilkins v Rogerson (39TC344)

A company arranged for a tailor to provide some of its employees with a suit, overcoat or raincoat, up to a certain cost. The employees had to order the article that they wanted and the tailor would send the bill to the company for payment. The Inland Revenue argued that the price the company paid for the clothing was chargeable on the employees as earnings from their employment.

The Court agreed that the clothing was taxable as earnings, but held that the chargeable amount was what the employees could get for it if they sold it (in other words, its secondhand value), not the original cost to the company. The second hand value was about a third of what the clothing cost the employer.

[Nowadays, unless the employees were lower paid, we would be able to charge the full cost. Part of it (equal to the second hand value) would be charged under Section 62 and the balance under the benefits code (see EIM21640).]