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HMRC internal manual

Employment Income Manual

The benefits code: expenses payments to, and benefits of, pensioners and former employees

Sections 70 and 201 ITEPA 2003

The benefits code charges an expense payment (Section 70(1) ITEPA 2003) or a benefit provided (Section 201(1) ITEPA 2003) to a director or employee (except, for 2015/16 and earlier, one in excluded employment (EIM20007)), who holds an employment during a year. It follows that no charge can arise under either section in a year when there is no employment unless, exceptionally, the benefit or expense was arranged before the employment ceased but not provided or paid until after the employment ceased in a deliberate attempt to exploit the wording of the statute.

Consequently expenses payments made and benefits provided after a director or employee has left the employment are not chargeable under the benefits code (EIM20006), except that two benefits are chargeable. They are:

  • the waiving or writing off of a loan (EIM21740 onwards) and
  • a failure to deduct PAYE tax from the remuneration of certain directors (EIM21790 onwards).

However, benefits provided for a director or employee on or after termination of employment may be chargeable under other legislation. See EIM15120 where the benefit is provided on or after retirement and EIM13270 where the benefit is otherwise connected with the termination of the employment.