Cost to provider and money’s worth

Produced by Tolley

The following Employment Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:

  • Cost to provider and money’s worth
  • Money’s worth
  • Cost to provider
  • Amounts paid by the employee towards the benefit
  • Interaction with other rules in the benefits code
  • National Insurance

Cost to provider and money’s worth

There are two general methods that apply to the calculation of the taxable value of benefits in the absence of specific rules such as scale charges or set methods of calculation in the legislation. These general methods are ‘cost to the employer’ and ‘money’s worth’.

Money’s worth

This rule was developed before the benefits code (in ITEPA 2003) was written. Case law (see Rogerson) established that an employee should be taxed on the ‘money’s worth’ of the item in question. This was the amount that the employee could realise from the benefit in question. In other words, ‘money’s worth’ is generally the second-hand value of the benefit.

This method of valuing benefits looks at the value of the benefit in the hands of the employee. It is still valid today, but most items that may be provided to employees no

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