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Unformatted text preview: s appeal to the Privy Council. Outcome of the Privy Council Appeal 9. In contrast to the Court of Appeal’s decision, the Privy Council held that UK authorities on the meaning of expressions in UK tax legislation are of assistance in construing identical expressions in the Ordinance concerning the same subject matter. It was also held that “perquisite” has the same meaning in the Ordinance as it has in the UK legislation. 10. The decision (reported in 3 HKTC 245 ) reflected the Department’s pre-Glynn understanding of what constituted a chargeable perquisite to the extent that it recognized that the term includes: (a) money which can be obtained from property which is capable of being converted into money; and money which is paid in discharge of a debt of the employee. (b) However, the Judicial Committee went further when it held that there is no difference between a debt of the taxpayer discharged by an employer pursuant to the contract of service and money paid for the benefit of an employee by his employer pursuant to the contract of service. The Privy Council was of the view that money paid at the request of an employee is equivalent to money paid to the employee. In this regard it was stated that an identifiable sum required to be expended by an employer pursuant to a contract of service for the benefit of the employee, is money paid at the request of the employee and is taxable as either part of the employee’s salary or as a monetary perquisite. 11. The decision did not, however, encompass all benefits derived by an employee from his employment. Inconvertible benefits not involving the expenditure of money or expenditure not attributable wholly or proportionately to one employee were recognized as not being chargeable1. As an example, 3 the Privy Council mentioned a nursery school provided by an employer for the children of all its employees. It also accepted that benefits resulting from expenditure by an employer for a non-contractual reason – for example on compassionate grounds – escaped chargeability if lacking the elements of expectation and continuity. The Privy Council’s position concerning such benefits reflected the Department’s pre-Glynn practice. 12. On the other hand, the decision represented a departure from the Department’s pre-Glynn practice in that it was not consistent with the view that an inconvertible benefit escaped chargeability to Salaries Tax if the employer rather that the employee was the party liable for the payment of the relevant expense. 13. As the Privy Council’s decision in the Glynn case confirmed that not all employment benefits come within the charge to Salaries Tax, it mitigated to a certain extent the effects of the Court of Appeals decision. Nevertheless, the decision, and in particular its effective rejection of the “liability test” as a determinant of chargeability, made it clear that the scope of the then legislation was wider than the Department had understood it to be pre-Glynn. DETAILS OF THE 1991 AMENDMENT 14. As foreshadowed in the announcement after the Court of Appeal decision, the Ordinance...
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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