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Unformatted text preview: benefits, were taxable. The Department’s assessing practice was based on the understanding that UK decisions had established that benefits received in a form other than money, unless covered by specific provisions in the Ordinance, could only be treated as chargeable income if they took the form of “money’s worth”. A benefit was regarded as constituting money’s worth if it was capable of being converted into money (by sale or some other means) by the recipient or involved the discharge of a personal liability of the employee. On the other hand, if the Department recognized that the employee was not liable for the relevant expense and the benefit was inconvertible, it was generally accepted that the benefit was not chargeable. 5. With regard to education benefits, however, the Department consistently took the view that any payment made by an employer in respect of education expenses of an employee’s child represented a chargeable benefit to the employee. This position was based on the understanding that it was not possible for an employee as a parent to transfer the liability for the education of his children to a third party. Any payment made by the employer was treated as discharging the employee’s liability and accordingly regarded as “money’s worth”. The Glynn Case – the Court of Appeal decision 6. In the Glynn case, school fees in respect of Mr. Glynn’s daughter were paid direct to the school by his employer. The issue, in broad terms, was whether the payments constituted chargeable income of Mr. Glynn or escaped chargeability by virtue of the arrangements used to make the payments. 7. The majority of the Court of Appeal held that the payments in question had been correctly treated by the Department as being chargeable to Salaries Tax. The decision (reported in 2 HKTC 383 ) was significant in at least two respects. Firstly, because all three members of the Court agreed that it had wrongly been assumed that UK authorities were directly relevant and applicable in Hong Kong and, secondly, because a majority found that the word “perquisite” in the Ordinance should be given its wide ordinary meaning. A strict application of the decision would have required the taxation of all benefits derived by an employee from his employment. The Administration’s response to the Court of Appeal decision 8. In view of the implications of the decision, particularly in relation to the identification and valuation of benefits, the Administration decided that the Ordinance should be amended to accord with the practice followed by the 2 Department before the Glynn case arose. This decision was announced by the Department in a public statement issued in March 1989. It was also announced that the Department would continue to apply its pre-Glynn practice pending the introduction of the legislation. Shortly afterwards, drafting work commenced on the proposed legislation but finalization was held in abeyance pending the outcome of Mr. Glynn’...
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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