Commentary on Sections Example 3 £150(Pe) – £50(E) = £100 Introduction
846.Most of the provisions that form part of the benefits code derive from Chapter 2 of Part 5 of ICTA. Those provisions do not apply to all Schedule E taxpayers. Until changes introduced by the FA 1989, Chapter 2 was entitled “Supplementary charging provisions applicable to directors and higher-paid employees and office holders”. This title reflected the origins of the legislation but the threshold for the application of these provisions certainly had not kept pace with inflation. By 1989 it had become difficult to contend that all the employees within the scope of Chapter 2 were necessarily “higher-paid”. Thus, in 1989, the title of the Chapter was changed to “Employees earning £8,500 or more and directors”.
847.However, the basic concept of the Chapter remained unchanged. It began from the position that no-one was within the scope of the Chapter and then brought in those employees who met its criteria. But it is now the case that by far the majority of employees do earn over £8,500. The benefits code therefore reverses the basic concept so that the benefits provisions apply to all employees, unless they fall within the class of excluded employees.
848.The purpose of this Chapter is to identify those employees who are not within the scope of certain of the benefits provisions.
849.This change of approach is described in full in Note 26 in Annex 2.