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HMRC internal manual

Employment Status Manual

Application of the tax rules: benefits in kind

Paragraph 10 Schedule 12 Finance Act 2000/Section 55 ITEPA 2003

Regulation 7(1) SI 2000 No. 727


The legislation requires all payments and benefits to be taken into account at Steps One and Two. Benefits include all benefits in kind as defined under the normal Employment Income rules/Benefits Code (Chapters 2 to 11 of Part 3 ITEPA 2003). The rules in Part V Chapter II ICTA 1988/certain parts of the Benefits Code apply only where the worker is a director of the intermediary or an employee with emoluments at a rate of £8,500 or more a year.

Normally this will cause no problem and it will be obvious that the benefits legislation does apply. However, in cases where the worker is not a director and the point is in doubt, you will need to work out whether he or she is remunerated at a rate of £8,500 or more a year, see EIM20100 onwards. In doing so, you should follow the normal procedure and take into account the value of any benefits in kind, as well as any other emoluments. The deemed payment should be counted in this calculation.