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Unformatted text preview: t the benefits are provided under circumstances which would not warrant the application of the anti-avoidance provisions. 5 Liability of Employee discharged by Employer 19. The Privy Council confirmed in the Glynn case that perquisite includes money which is paid in discharge of a debt of the employee. This position has not been affected by the 1991 Amendment discussed above. Accordingly, where such a payment is made by an employer, the amount of the payment is regarded by the Department as chargeable income of the employee. Convertible Benefits 20. The Privy Council also confirmed that perquisite includes money which can be obtained from property which is capable of being converted into money. The introduction of the “liability test” in section 9(1)(a)(iv) has not affected the position. Section 9(2A)2 provides that the test shall not operate to exclude from income “any benefit capable of being converted into money by the recipient” 4. 21. Where a benefit takes the form of an asset which can be converted into money by sale, the Department’s basic approach will be to take as the amount assessable the sum which the asset might reasonably be expected to fetch if sold in the open market at the time of receipt of the benefit; i.e. the “second-hand” value5. 22. Benefits6 which are not convertible into money by sale are sometimes convertible by other means. For example, an employee might be provided by his employer with the free use (but not ownership) of a car under an arrangement which would allow the employee to “surrender” the car and take additional wages instead. Such a benefit would be viewed by the Department as being convertible into money and accordingly chargeable (see Heaton v Bell 46 TC 211). It is not possible to lay down hard and fast valuation rules to cover benefits which come within this category. The approach taken will depend on the nature of the benefit and the circumstances under which it is provided. In general terms, however, the aim will be to ascertain, as objectively as possible, the amount of money the employee could obtain if he chose to “convert” the benefit. For the example given, the Department would treat as assessable income each year the amount of additional wages the employee would have received if he had chosen to forego the benefit. 6 Education Benefits 23. Amounts “paid by an employer in connection with the education of a child of an employee” are by virtue of section 9(2A) not subject to the “liability test” in section 9(1)(a)(iv). Accordingly, where such a payment is made pursuant to the employee’s contract of employment, then irrespective of whether the employee or the employer is the party liable for the relevant expense, the amount paid will be treated as chargeable income of the employee. 24. The Department will interpret the expression “paid by an employer in connection with the education of a child” as covering not only payments for tuition expenses, but also payments for incidental education expenses such as boarding fees and the cost of school outings. Amoun...
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This note was uploaded on 03/11/2010 for the course BBA B415 taught by Professor Mrli during the Spring '10 term at Academy of Art University.
- Spring '10