Street cleaner Paul Spiers has become something of an internet celebrity by dint of the refusal of his employers Veolia to allow him to accept cash raised for him by the grateful ratepayers of Beckenham to send him off on a well-earned holiday to Portugal. Happily, this seems to have been resolved by Mr Spiers having been declared the winner of a competition organised by a travel company, the entry requirements for which were very prescriptive (limited to Beckenham street cleaners named Spiers) and for which the prize was, by extraordinary coincidence, a holiday to Portugal.
Predictably, we see the world through the lens of tax. So is there a risk that gifts of this kind create a tax charge? There are swathes of case law on the subject. And the answer may be different according to whether what is received is cash or is a non-cash benefit (such as a holiday).
First, cash. The basic charging rule taxes a receipt of money if it arises ‘from’ the employment. The fact that a payment is made voluntarily or by someone other than the employer doesn’t exempt it from tax (think tips, which are always taxable). But a cash gift isn’t taxable under the basic rules if it’s made on personal grounds (for example, a wedding present) or as a mark of personal esteem or appreciation: what the writer memorably heard described many years ago as ‘the Great Bloke Principle’.
The line can be fuzzy between a payment for having given wonderful service (taxable) and a payment for being a wonderful person (tax-free). For example, sporting testimonials are generally taxable: but when on winning the World Cup in 1966 Bobby Moore was given £1,000 by the Football Association and £750 by the manufacturer of Radox Bath Salts, those amounts were held not to be taxable. But such cases are rare: HMRC guidance lists only half a dozen examples.
Nonetheless, it’s probable that, under the basic charging rule, Mr Spiers would fall the right side of the line as regards cash: the fact that the gift is said to be to ‘a much-loved figure’ who is ‘an integral part of our Beckenham village, adored by all’ who is hailed for ‘lifting everyone’s spirits’ with his ‘positive presence’ and was made after Mr Spiers disclosed that ‘it was his birthday and he was saving for a holiday in Portugal’ are all the kind of factors that mark out the payment as a mark of personal esteem. Essentially, it seems that the motivation for the ratepayer’s whip-round was not that Mr Spiers was a Great Street Cleaner but that he was a Great Bloke.
The tax treatment of the holiday is a little less clear. Benefits of this kind are taxable if they are received ‘by reason of the employment’. The courts have held that that has a wider meaning than ‘from’ the employment; a looser connection with the employment may suffice. HMRC say that ‘you can normally assume that a benefit which is provided by someone other than the employer and which is plainly connected with the employee’s employment has been provided by reason of the employment’; but that (depending on how you interpret ‘plainly connected’) may be going too far. At any rate, one can say that it’s not altogether impossible that HMRC might invite Mr Spiers to pay income tax on the cost of the holiday, though we should be disappointed if they were to do so.
More worryingly, it’s possible that if a cash payment escapes the charge to tax under the basic charging rule as not being ‘from’ the employment, it may nonetheless be taxable under the benefit in kind rules as being received ‘by reason of the employment’. This was precisely what happened in Orient Overseas Container Line LTd (UK Branch) v HMRC [2023] UKFTT 996 (TC). This is because there is some precedent for holding that the term ‘benefit’ is (counter-intuitively) wide enough to encompass a cash payment, such that a cash payment may, despite being outside the scope of the general charging rule, be nonetheless caught under the ‘benefit’ rules.
Meanwhile, let’s all wish Mr Spiers a happy holiday.
Street cleaner Paul Spiers has become something of an internet celebrity by dint of the refusal of his employers Veolia to allow him to accept cash raised for him by the grateful ratepayers of Beckenham to send him off on a well-earned holiday to Portugal. Happily, this seems to have been resolved by Mr Spiers having been declared the winner of a competition organised by a travel company, the entry requirements for which were very prescriptive (limited to Beckenham street cleaners named Spiers) and for which the prize was, by extraordinary coincidence, a holiday to Portugal.
Predictably, we see the world through the lens of tax. So is there a risk that gifts of this kind create a tax charge? There are swathes of case law on the subject. And the answer may be different according to whether what is received is cash or is a non-cash benefit (such as a holiday).
First, cash. The basic charging rule taxes a receipt of money if it arises ‘from’ the employment. The fact that a payment is made voluntarily or by someone other than the employer doesn’t exempt it from tax (think tips, which are always taxable). But a cash gift isn’t taxable under the basic rules if it’s made on personal grounds (for example, a wedding present) or as a mark of personal esteem or appreciation: what the writer memorably heard described many years ago as ‘the Great Bloke Principle’.
The line can be fuzzy between a payment for having given wonderful service (taxable) and a payment for being a wonderful person (tax-free). For example, sporting testimonials are generally taxable: but when on winning the World Cup in 1966 Bobby Moore was given £1,000 by the Football Association and £750 by the manufacturer of Radox Bath Salts, those amounts were held not to be taxable. But such cases are rare: HMRC guidance lists only half a dozen examples.
Nonetheless, it’s probable that, under the basic charging rule, Mr Spiers would fall the right side of the line as regards cash: the fact that the gift is said to be to ‘a much-loved figure’ who is ‘an integral part of our Beckenham village, adored by all’ who is hailed for ‘lifting everyone’s spirits’ with his ‘positive presence’ and was made after Mr Spiers disclosed that ‘it was his birthday and he was saving for a holiday in Portugal’ are all the kind of factors that mark out the payment as a mark of personal esteem. Essentially, it seems that the motivation for the ratepayer’s whip-round was not that Mr Spiers was a Great Street Cleaner but that he was a Great Bloke.
The tax treatment of the holiday is a little less clear. Benefits of this kind are taxable if they are received ‘by reason of the employment’. The courts have held that that has a wider meaning than ‘from’ the employment; a looser connection with the employment may suffice. HMRC say that ‘you can normally assume that a benefit which is provided by someone other than the employer and which is plainly connected with the employee’s employment has been provided by reason of the employment’; but that (depending on how you interpret ‘plainly connected’) may be going too far. At any rate, one can say that it’s not altogether impossible that HMRC might invite Mr Spiers to pay income tax on the cost of the holiday, though we should be disappointed if they were to do so.
More worryingly, it’s possible that if a cash payment escapes the charge to tax under the basic charging rule as not being ‘from’ the employment, it may nonetheless be taxable under the benefit in kind rules as being received ‘by reason of the employment’. This was precisely what happened in Orient Overseas Container Line LTd (UK Branch) v HMRC [2023] UKFTT 996 (TC). This is because there is some precedent for holding that the term ‘benefit’ is (counter-intuitively) wide enough to encompass a cash payment, such that a cash payment may, despite being outside the scope of the general charging rule, be nonetheless caught under the ‘benefit’ rules.
Meanwhile, let’s all wish Mr Spiers a happy holiday.
