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HMRC internal manual

Employment Income Manual

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The benefits code: what is meant by benefit: motive of employer is irrelevant: Rendell v Went

Section 201(2) ITEPA 2003

“Benefit” means a benefit or facility of any kind (Section 201(2) ITEPA 2003). It does not matter whether in providing a benefit an employer is intending to benefit himself rather than, or as well as, the employee. So long as the employee or a member of his family or household (Section 721(5) ITEPA 2003) is provided with a benefit by reason of his employment, a tax charge will arise.

Rendell v Went (41TC641)

In Rendell v Went the company took over and paid for the defence of a director against a dangerous driving charge. It did so because it feared the loss of the director’s services if he was sent to prison. The full amount paid by the company was held to be a chargeable benefit. The fact that the company spent the money primarily for its own benefit and only as a by- product benefited the director, did not prevent the payment giving rise to a chargeable benefit.

The decision in the House of Lords was unanimously in the Crown’s favour. The leading judgement was given by Lord Reid, and included the following passage (page 655):

“The facts make it clear that the company did incur expense in the provision of a legal defence for its director, the Appellant. And it appears to me to be equally clear that the provision of that defence was a benefit within the meaning of this Sub-section. It was argued that the expense had been incurred solely for the purpose of protecting the interests of the company. That may be so. But it cannot be doubted that in fact the provision of the defence was a benefit to him: if it had not been provided by the company he would have had to pay for his own defence or take the risk that lack of a proper defence might lead to his being convicted and sent to prison. No one suggests that he could have obtained free legal aid. And I can find nothing in the Act to support an argument that a benefit in fact provided by the company ceases to be a benefit within the meaning of the Section if it is proved that the company’s sole reason, motive or purpose was to protect itself and was not to favour its director.”

And Viscount Radcliffe made the same point in more succinct terms (page 656):

“But an expenditure is not the less advantageous to a director because it suits or advantages his company to make it.”