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Does Available Equal Provided?

18 October 2001 / Robin Mathew
Issue: 3829 / Categories:


If accommodation is 'available', then is it 'provided' in terms of section 145, Taxes Act 1988?, asks ROBIN MATHEW QC.



If accommodation is 'available', then is it 'provided' in terms of section 145, Taxes Act 1988?, asks ROBIN MATHEW QC.


OVERBURDENED WITH LEGISLATION, public statements of practice and unpublished conventions, sometimes we forget the basic rule. Sometimes the Inspector is led astray by the draftsman of the relevant manual. Thus we may read the textbooks and then read the manuals and learned articles, and take a view on the problem. Then we realise that we or he or they, the learned authors, have not read the statute word for word or considered its purpose or policy.

For instance, in terms of the Schedule E 'benefit in kind' charge for an employee's living accommodation, the Revenue's Schedule E Manual says at paragraph 11405:

'Section 145(1), Taxes Act 1988

The question of for what period living accommodation is provided for an employee is relevant for the charges under both sections 145 and 146, Taxes Act 1988. Section 145(1) says:
"… where living accommodation is provided for a person in any period by reason of his employment, he is to be treated for the purposes of Schedule E as being in receipt of emoluments …"
Provided is not defined in the legislation and its meaning has not been considered by the courts in relation to a charge under section 145. The word must be given its ordinary dictionary meaning of "supplied or furnished a person with a thing".
In some cases provided will mean available for use whereas in others it will mean actually used (see paragraph 11406 for more detail). The meaning of provided is often an issue in the case of provided holiday living accommodation.'

More than one meaning

The dichotomy slowly becomes apparent: the manual asserts that 'provided' has two meanings in the same provision. No reasons for this curious state of affairs are given. Indeed in paragraph 11406, to which the previous paragraph 11405 refers, the word 'provided' is said to have different meanings in different situations in the same enactment, viz. section 145(1), which imposes a charge to tax. If it is a holiday home for a director, and his family, then 'provided 'means 'available', but if it is for unrelated employees, they are only charged for the actual use.

At that point, I begin to feel uneasy. The word 'provided' can have strictly different meanings in different contexts like so many English words, especially those describing a transaction. But here the word is axiomatic to the tax charge and it apparently differentiates between different taxpayers (on a socio-economic basis). Does the Schedule E benefit in kind code really incorporate a statutory prejudice of that kind?

I have assumed that the pre-conditions for the benefit in kind charge are present. That is to say, the taxpayer is exposed to the Schedule E charge if the relevant living accommodation is provided in terms of section 145 or its companion provision in section 146, if the cost of providing the accommodation exceeds £75,000.

To be fair to the author of the Schedule E Manual, he does say in paragraph 11405 that the word 'provided' is undefined, and in paragraph 11421 that whether it means 'availability' from time to time is arguable, in the sense that that is the meaning which the Inspector should argue for. He also says in paragraph 11405, that the meaning has not been considered by the courts. The reference to undefined is disingenuous. The word is undefined because the draftsman correctly and traditionally leaves the interpretation of such a common English word to the judge, who will interpret it according to its context and the purpose of the enactment (at least, that is the theory).

Legalistic interpretation

What does the statute say upon a true, i.e. legalistic, interpretation? Section 145 reads, so far as pertinent, as follows:

'(1) Subject to the provisions of this section, where living accommodation is provided for a person in any period by reason of his employment … he is to be treated for the purposes of Schedule E as being in receipt of emoluments of an amount equal to the value to him of the accommodation for the period, less so much as is properly attributable to that provision of any sum made good by him to those at whose cost the accommodation is provided.'

The reasonable taxpayer would read those words, in my view, as imposing income tax on the value of the accommodation which he used. He would be surprised, if not scandalised, if the same was multiplied by the number of days during which it was available. For instance, the boss says: 'You can have my holiday villa in Spain for the next three weeks – just go for as long as you like, when you like'. But he goes for just one week out of the three. What Schedule E benefit in kind charge does he incur? Let us look at the manual more closely: paragraph 11406 reads as follows:

'Living accommodation: meaning of provided – practical considerations

Section 145(1), Taxes Act 1988
For details of the relevance of the word provided in living accommodation cases see paragraph 11405. In deciding in a particular case whether provided means available for use or means actually used, the following factors are relevant:
      • Who can use the living accommodation? We accept that if living accommodation is genuinely available for use by more people than could actually use it at any one time, then provided means the periods actually used only. For example if five unrelated employees were allowed to use an employer owned two bedroom holiday villa, we would only seek a provided living accommodation charge on each employee for the period that employee actually used the villa.
      • Why was the living accommodation bought or rented and how has it been used since acquisition? If the living accommodation was bought as holiday accommodation for a director and family, provided is likely to mean available for use. By contrast if it was bought as a genuine letting business by the employer and has been let out commercially, then provided will mean the periods actually used by the employee only.'

Next, take paragraph 11421 of the Schedule E Manual, as the last example – before going to the lawyer's arguments. This reads:

'Living accommodation: meaning of provided – example 1

Section 145(1), Taxes Act 1988 and Extra-statutory Concession A91
The meaning of provided can cause difficulties often in the case of holiday accommodation (see paragraph 11405). This page, example paragraph 11422, and example paragraph 11423 use examples with similar basic facts to bring out the different meaning 'provided' can have depending on the facts of the case.
A United Kingdom company purchases a flat in a French ski resort for £200,000. It is agreed that a market rental for the property would be £500 a week during the six month skiing season and £100 a week during the rest of the year. A husband and wife who are both directors of the company use the flat for holidays with their children for three weeks during the skiing season and one week in the rest of the year. Their children are neither employees nor directors of the company. The accountants advise that the sole reason the property was bought was as a holiday home for the husband and wife. It has only been used by them as such.
We would argue in this case, "provided" is equivalent to "available for use". Assuming the flat was habitable for the whole of the year, we would seek a section 145 charge on availability for the whole of the year. The accountants may argue that the fact that the husband and wife work full-time, prevents them using the flat for more than the four weeks in the year they do use it. So effectively they are only provided with it for four weeks. We do not accept that argument.
The total charge under section 145 for the tax year would be £15,600 (£500 x 26 + £100 x 26). That would be split between the husband and wife in whatever was a reasonable way – presumably half each in this case. Although in law there may be a full £15,600 charge each on both the husband and the wife, this is restricted in total to one charge of £15,600 by Extra-statutory Concession A91a (see paragraph 11410). There is no further charge under section 146 because Extra-statutory Concession A91b says we will not seek a further charge under section 146 when the section 145 charge is calculated by reference to the annual rent the property might fetch on the open market (see paragraph 11472).'

The distinction drawn by the instructions in the manual is thus quite clear. In my view, the introduction of the issue of availability of accommodation is unjustified and has led to the Revenue collecting large amounts of unjustified income tax for over 20 years. Often this will have occurred in the context of a back duty investigation so the amount of interest and penalties will have been commensurately increased.

Tested in court

There is one case of interest on the subject. This is Templeton v Jacobs [1996] STC 991. The issue was whether, in terms of the general charge on benefits in kind found in section 154, Taxes Act 1988, a benefit had been provided by the prospective employer building an office at the taxpayer's house for him to use. The judge, Mr Justice Jonathan Parker, adopted the argument of the Revenue's counsel and trenchantly held that the benefit was 'provided when it was received by the taxpayer' or as he put it more succinctly a little later, 'it was provided when the taxpayer got it'. Further the judge said: 'No benefit is provided for the purposes of section 154(1) until the benefit in question becomes available to be enjoyed by the taxpayer'.

The point was that the taxpayer had argued that the benefit was provided when it was available, in that case when the cash was paid by the employer to the builder. The taxpayer did not succeed. Thus the argument that provided means available in the benefit in kind Schedule E legislation has been expressly rejected.

Put shortly, available means that the benefit is put at the option of the taxpayer by the employer and provided means it is specified and received by the employee for his use.

What is the true intention?

This can be clearly demonstrated by the scheme of the legislation. Throughout sections 145 and 146 the words 'provision' and 'provided' are used repeatedly. They are used, in my view, to qualify the nature of the charge. It should be remembered in this context that the charge may be part of the Schedule E benefits in kind code, but it affects everyone in employment, not merely those who earn more than £8,500 a year or are directors. Therefore it is unlikely that Parliament meant the tax burden to be unduly severe on the ordinary man.

It is also significant, as has been shown, that the general charging provision in section 154 uses the word 'provided'. To provide has a number of meanings, and its obvious use in these enactments is to equip or supply someone with something. In the course of doing so, then something is made available. As I have said, 'available' means something at a person's disposal. In section 157 the charge is on cars which are available. The charge on the employee who had a mobile telephone was dependent on whether it was available. The charge on the benefit of a loan is dependent on whether it is outstanding, not whether it is available. There are many other such examples. The draftsman has chosen his words carefully, as he should. Indeed, the tailoring of the charge also demonstrates the point, as the charge is upon so much value (as defined) as is referable '… to him of the accommodation during the period …' of provision.

There are many other difficulties, ambiguities and uncertainties in the benefit in kind Schedule E code, but this error of approach by the draftsman of the Schedule E Manual should be corrected, and a wrongful levy of income tax for 20 or so years tacitly should be admitted without litigation.


Robin Mathew QC is a member of New Square Chambers, 12 New Square, Lincoln's Inn, London WC2A 3SW, tel: 020 7419 8000, fax: 020 7419 8050, e-mail:


Issue: 3829 / Categories:
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