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HMRC internal manual

Employment Income Manual

Benefits: special security measures

Section 377 ITEPA 2003

A nominated Inspector should deal with all claims relating to security expenditure (see EIM21813). (This content has been withheld because of exemptions in the Freedom of Information Act 2000)

Where an employee or director faces a special threat to their personal physical security Section 377 ITEPA 2003 provides, in certain circumstances, for a deduction to be given in respect of the following benefits and reimbursed expenses:

  • so much of the cost of security assets or services (see EIM21811) provided for an employee by reason of his or her employment as falls to be included in his or her earnings and
  • any expenses incurred by the employee in connection with the provision or use of such assets or services that are reimbursed by his or her employer (or someone else).

No deduction can be given for expenditure incurred by the employee that is not reimbursed.

Conditions to be met for Section 377 relief

All the following conditions are to be satisfied before a deduction under Section 377 may be given:

  • the security asset or service is provided for or used by the employee to meet a special threat to his or her personal physical security
  • that threat arises wholly or mainly by virtue of the particular employment he or she holds
  • the person providing the security measures (or reimbursing their cost) has the meeting of that threat as his or her sole object. (This ensures that any intention on the employer’s part to reward his or her employee by meeting security expenditure will disqualify it.)
  • in the case of a security service, the benefit to the employee consists wholly or mainly of an improvement of his or her personal physical security
  • in the case of a security asset, the provider intends it to be used solely to improve the employee’s personal physical security. (But see EIM21812 where the provider intends the asset to be used only partly for that purpose.)

These conditions are tightly drawn. The deduction is intended for people whose work exposes them to a very real threat to their physical safety from terrorists, extremists and others who may resort to violence. It follows that a deduction cannot be given for:

  • security measures against the kind of general criminal threat that all citizens may face to a greater or lesser degree, for example, when travelling home late from work, or
  • expenditure incurred primarily to meet a threat to property (including cash and other personal belongings), or
  • security measures taken against a threat unconnected with a person’s employment.

Lord Hanson v Mansworth (SpC 410/04)

If you follow the above guidance to refuse an application for this relief, because there is no evidence of a “special threat” to a person’s physical security, you may be referred to the decision in Lord Hanson v Mansworth.

Lord Hanson was a prominent businessman in the UK from the 1970s until the mid 1990s. He was Chairman of Hanson plc for most of those years, which in 1990 was one of the ten largest UK companies. He was also an outspoken supporter of the conservative government between 1979 -1989, led by Mrs Thatcher. He was knighted in 1976 and became a peer in 1983.

Between 1987 - 1997 (when he retired) Hanson plc provided 24 hour security protection at Lord Hanson’s country home. Relief from the benefits charge on the expenditure for security was claimed on the basis that Lord Hanson was under a special threat, particularly from the IRA, which in the 1980s and early 1990s attacked many political and commercial targets. Although Lord Hanson was never attacked or threatened personally, he contended that his high public profile, and known association with the government, made him a potential target and this constituted a “special threat”.

The Special Commissioners held for Lord Hanson. The Revenue did not appeal the decision as it was based on the very special, if not unique, circumstances of the case and in our view it is unlikely to have any precedent value in any other case. Indeed the Commissioners’ concluded by stating as follows -

“The facts of the appeal, and the Appellant himself, are unique. We have concluded that, by virtue of his prominence in business life in connection with which he maintained high profile political connections and friendships, he was a member of a very small group of people who are likely to be regarded as entitled to the deduction.”

Consequently this decision does not alter our view, as expressed in the guidance above, that no relief is due unless an employee can provide evidence of a special threat to them personally. Without such evidence, the decision in the Lord Hanson case could only apply to an employee who has a similarly high degree of prominence in business (Lord Hanson gave his name to a major plc), and in society in general, as a result of his personal friendship with the Prime Minister, at a time when such high profile individuals are generally under threat from terrorist groups. It is unlikely that these conditions will be satisfied by anyone else.