XN000022-1989-03-16 — Page 7

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THURSDAY, MARCH 16, 1989

MR AU-YEUNG SAID THAT PRIOR TO THE GLYNN CASE IT WAS GENERALLY ACCEPTED BY TAX PRACTITIONERS AND THE INLAND REVENUE DEPARTMENT THAT PRINCIPLES DERIVED FROM UK CASE LAW DETERMINED WHETHER FRINGE BENEFITS WERE CHARGEABLE TO SALARIES TAX.

THE INLAND REVENUE DEPARTMENT'S ASSESSING PRACTICE WAS BASED ON THE UNDERSTANDING THAT CASE LAW HAD ESTABLISHED THAT BENEFITS

IN A RECEIVED

FORM OTHER THAN MONEY COULD NOT BE TREATED AS CHARGEABLE INCOME UNLESS THEY TOOK THE FORM OF "MONEY'S WORTH".

A BENEFIT WAS REGARDED AS CONSTITUTING "MONEY'S WORTH" IF:-

(I) IT WAS CAPABLE OF BEING CONVERTED INTO MONEY BY THE

RECIPIENT; OR

(II) IT WAS THE DISCHARGE BY THE EMPLOYER OF A PERSONAL

LIABILITY OF THE EMPLOYEE.

"ON THE BASIS OF THESE MONEY'S WORTH 'RULES' IT WAS GENERALLY ACCEPTED THAT THE FORM IN WHICH A BENEFIT WAS PROVIDED TO AN EMPLOYEE BY HIS EMPLOYER COULD DETERMINE WHETHER THE BENEFIT WAS CHARGEABLE TAX," HE SAID.

WITH REGARD TO

EDUCATION

BENEFITS, HOWEVER, THE DEPARTMENT CONSISTENTLY TOOK THE VIEW THAT THEY WERE CHARGEABLE ΤΟ IRRESPECTIVE OF THE ARRANGEMENTS USED TO PROVIDE THE BENEFITS.

TAX

"THE BASIS FOR THIS PRACTICE WAS AN 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.

"AS SUCH, ANY PAYMENT MADE BY THE EMPLOYER DISCHARGING THE EMPLOYEE'S LIABILITY AND WAS THEREFORE CONSTITUTE 'MONEY'S WORTH'," MR AU-YEUNG ADDED.

WAS TREATED AS CONSIDERED TO

THE MAJORITY OF THE COURT OF APPEAL HELD IN THE GLYNN CASE THAT THE PAYMENTS IN QUESTION HAD CORRECTLY BEEN TREATED BY THE DEPARTMENT AS BEING CHARGEABLE TO SALARIES TAX, BUT THE TERMS OF THE DECISION WENT A LOT FURTHER THAN SIMPLY REACHING THIS FINDING, HE NOTED.

"ALL THREE MEMBERS OF THE COURT AGREED THAT IT HAD WRONGLY BEEN ASSUMED THAT THE UK AUTHORITIES WERE DIRECTLY RELEVANT AND APPLICABLE IN HONG KONG WHILE THE MAJORITY FOUND, IN ESSENCE, THAT SUBSTANCE WAS MORE IMPORTANT THAN FORM AND THAT UNDER THE PRESENT TERMS OF THE LAW ALL BENEFITS DERIVED BY AN EMPLOYEE FROM HIS EMPLOYMENT ARE CHARGEABLE TO SALARIES TAX," MR AU-YEUNG SAID.

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