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39 1997

TAXES CONSOLIDATION ACT, 1997

CHAPTER 3

Expenses allowances and provisions relating to the general benefits in kind charge

Interpretation ( Chapter 3 ).

[ITA67 s119 and s122]

116. —(1) In this Chapter—

business premises”, in relation to a body corporate, includes all premises occupied by that body for the purpose of any trade carried on by it and, except when the reference is expressly to premises which include living accommodation, includes so much of any such premises so occupied as is used wholly or mainly as living accommodation for any of the directors of the body corporate or for any persons employed by the body corporate in any employment to which this Chapter applies;

control”, in relation to a body corporate, means the power of a person to secure—

(a) by means of the holding of shares or the possession of voting power in or in relation to that or any other body corporate, or

(b) by virtue of any powers conferred by the articles of association or other document regulating that or any other body corporate,

that the affairs of the first-mentioned body corporate are conducted in accordance with the wishes of that person;

director” means—

(a) in relation to a body corporate the affairs of which are managed by a board of directors or similar body, a member of that board or body,

(b) in relation to a body corporate the affairs of which are managed by a single director or similar person, that director or person,

(c) in relation to a body corporate the affairs of which are managed by the members themselves, a member of the body corporate,

and includes any person in accordance with whose directions or instructions the directors of a body corporate, defined in accordance with the preceding provisions of this definition, are accustomed to act, but a person shall not, within the meaning of this definition, be deemed to be a person in accordance with whose directions or instructions the directors of a body corporate are accustomed to act by reason only that those directors act on advice given by the person in a professional capacity;

employment” means an employment such that any emoluments of the employment would be assessed under Schedule E, and references to persons employed by, or employees of, a body corporate include any person who takes part in the management of the affairs of the body corporate and is not a director of the body corporate.

(2) Any reference in this Chapter to anything provided for a director or employee shall, unless the reference is expressly to something provided for the director or employee personally, be construed as including a reference to anything provided for the spouse, family, servants, dependants or guests of that director or employee, and the reference in the definition of “business premises” to living accommodation for directors or employees shall be construed accordingly.

(3) (a) Subject to subsection (4) and paragraphs (b) and (c), the employments to which this Chapter applies shall be employments the emoluments of which, estimated for the year of assessment in question according to the Income Tax Acts and on the basis that they are employments to which this Chapter applies, and without any deduction being made under section 114 in respect of money expended in performing the duties of those employments, are £1,500 or more.

(b) Where a person is employed in 2 or more employments by the same body corporate and the total of the emoluments of those employments for the year of assessment in question estimated in accordance with paragraph (a) is £1,500 or more, all those employments shall be treated as employments to which this Chapter applies.

(c) Where a person is a director of a body corporate, all employments in which the person is employed by the body corporate shall be treated as employments to which this Chapter applies.

(4) All the directors of, and persons employed by, a body corporate over which another body corporate has control shall be treated for the purposes of paragraphs (b) and (c) of subsection (3) (but not for any other purpose) as if they were directors of that other body corporate or, as the case may be, as if the employment were an employment by that other body corporate.

Expenses allowances.

[ITA67 s116; FA74 s86 and Sch2 PtI]

117. —(1) Subject to this Chapter, any sum paid in respect of expenses by a body corporate to any of its directors or to any person employed by it in an employment to which this Chapter applies shall, if not otherwise chargeable to income tax as income of that director or employee, be treated for the purposes of section 112 as a perquisite of the office or employment of that director or employee and included in the emoluments of that office or employment assessable to income tax accordingly; but nothing in this subsection shall prevent a claim for a deduction being made under section 114 in respect of any money expended wholly, exclusively and necessarily in performing the duties of the office or employment.

(2) The reference in subsection (1) to any sum paid in respect of expenses includes a reference to any sum put by a body corporate at the disposal of a director or employee and paid away by him or her.

Benefits in kind: general charging provision.

[ITA67 s117; FA73 s41; FA74 s86 and Sch2 PtI; FA96 s131(9)(a)]

118. —(1) Subject to this Chapter, where—

(a) a body corporate incurs expense in or in connection with the provision, for any of its directors or for any person employed by it in an employment to which this Chapter applies, of—

(i) living or other accommodation,

(ii) entertainment,

(iii) domestic or other services, or

(iv) other benefits or facilities of whatever nature, and

(b) apart from this section the expense would not be chargeable to income tax as income of the director or employee,

then, sections 112 , 114 and 897 shall apply in relation to so much of the expense as is not made good to the body corporate by the director or employee as if the expense had been incurred by the director or employee and the amount of the expense had been refunded to the director or employee by the body corporate by means of a payment in respect of expenses, and income tax shall be chargeable accordingly.

(2) Subsection (1) shall not apply to expense incurred by the body corporate in or in connection with the provision for a director or employee in any of its business premises of any accommodation, supplies or services provided for the director or employee personally and used by the director or employee solely in performing the duties of his or her office or employment.

(3) Subsection (1) shall not apply to expense incurred by the body corporate in or in connection with the provision of living accommodation for an employee in part of any of its business premises which include living accommodation if the employee is, for the purpose of enabling the employee properly to perform his or her duties, required by the terms of his or her employment to reside in the accommodation and either—

(a) the accommodation is provided in accordance with a practice which since before the 30th day of July, 1948, has commonly prevailed in trades of the class in question as respects employees of the class in question, or

(b) it is necessary in the case of trades of the class in question that employees of the class in question should reside on premises of the class in question;

but this subsection shall not apply where the employee is a director of the body corporate in question or of any other body corporate over which that body corporate has control or which has control over that body corporate or which is under the control of a person who also has control over that body corporate.

(4) Subsection (1) shall not apply to expense incurred by the body corporate in or in connection with the provision of meals in any canteen in which meals are provided for the staff generally.

(5) Subsection (1) shall not apply to expense incurred by the body corporate in or in connection with the provision for a director or employee, or for the director's or employee's spouse, children or dependants, of any pension, annuity, lump sum, gratuity or other like benefit to be given on the death or retirement of the director or employee.

(6) Any reference in this section to expense incurred in or in connection with any matter includes a reference to a proper proportion of any expense incurred partly in or in connection with that matter.

(7) Where expense is incurred by a person connected with a body corporate, being expense which if incurred by the body corporate would be expense of the kind mentioned in subsection (1)(a), the body corporate shall be deemed for the purposes of this section to have incurred the expense, and subsection (1) shall apply accordingly in relation to any person, being a director or employee of the body corporate, in respect of whom the expense was incurred.

(8) A person shall be regarded as connected with a body corporate for the purposes of subsection (7) if the person is—

(a) a trustee of a settlement (within the meaning of section 794 ) made by the body corporate, or

(b) a body corporate,

and would be regarded as connected with the body corporate for the purposes of section 10 .

Valuation of benefits in kind.

[ITA67 s118(1), (2) and (4); FA69 s32(b) and (c)]

119. —(1) Any expense incurred by a body corporate in the acquisition or production of an asset which remains its own property shall be disregarded for the purposes of section 118 .

(2) Where the making of any provision mentioned in section 118 (1) takes the form of a transfer of the property in any asset of the body corporate and, since the acquisition or production of that asset by the body corporate, that asset has been used or has depreciated, the body corporate shall be deemed to have incurred in the making of that provision expense equal to the value of that asset at the time of the transfer.

(3) Where an asset which continues to belong to the body corporate is used wholly or partly in the making of any provision mentioned in section 118 (1), the body corporate shall be deemed for the purposes of that section to incur (in addition to any other expense incurred by it in connection with the asset, not being expense to which subsection (1) applies) annual expense in connection with the asset of an amount equal to the annual value of the use of the asset, but where any sum by means of rent or hire is payable by the body corporate in respect of the asset—

(a) if the annual amount of the rent or hire is equal to or greater than the annual value of the use of the asset, this subsection shall not apply, and

(b) if the annual amount of the rent or hire is less than the annual value of the use of the asset, the rent or hire shall be disregarded for the purposes of section 118 (1).

(4) In the case of an asset being premises, the annual value of the use of the asset shall be taken for the purposes of subsection (3) to be the rent which might reasonably be expected to be obtained on a letting from year to year if the tenant undertook to pay all usual tenant's rates, and if the landlord undertook to bear the costs of the repairs and insurance, and the other expenses, if any, necessary for maintaining the premises in a state to command that rent.

Unincorporated bodies, partnerships and individuals.

[ITA67 s123]

120. —(1) This Chapter shall apply in relation to unincorporated societies and other bodies as it applies in relation to bodies corporate and, in connection with this Chapter, the definition of “control” in section 116 (1) shall, with the necessary modifications, also so apply.

(2) This Chapter shall apply in relation to any partnership carrying on any trade or profession as it would apply in relation to a body corporate carrying on a trade if so much of this Chapter as relates to directors of the body corporate or persons taking part in the management of the affairs of the body corporate were deleted; but—

(a) “control”, in relation to a partnership, means the right to a share of more than 50 per cent of the assets, or of more than 50 per cent of the income, of the partnership, and

(b) where a partnership carrying on any trade or profession has control over a body corporate to which this Chapter applies (“control” being construed for this purpose in accordance with the definition of that term in section 116 (1))

(i) any employment of any director of that body corporate by the partnership shall be an employment to which this Chapter applies, and

(ii) all the employments of any person who is employed both by the partnership and by the body corporate (being employments by the partnership or the body corporate) shall, for the purpose of ascertaining whether those employments or any of them are employments to which this Chapter applies, be treated as if they were employments by the body corporate.

(3) Subsection (2) shall apply in relation to individuals as it applies in relation to partnerships, but nothing in this subsection shall be construed as requiring an individual to be treated in any circumstances as under the control of another person.