In Sarah Baylis v HMRC [2016] TC 05454 the First Tier Tribunal (FTT) found that care home fees paid by a company were a benefit in kind for the patient's spouse rather than her daughter.

A tax charge can arise where a benefit in kind (BIK) is provided to a member of an employee’s family or household.

  • The taxpayer was employed by a company of which her father was the majority shareholder and managing director.
  • When her mother entered a care home the taxpayer signed the contract with the home, but the company paid the fees directly.
  • HMRC raised discovery assessments on the basis that the care home fees paid were a BIK of the taxpayer, along with certain other credit card and third party payments.

The taxpayer appealed the assessments on the grounds that:

  • The nursing home fees were a BIK for her father, and not her.
  • The other amounts paid were settled by way of a dividend

The FTT upheld the taxpayer’s appeal, finding that:

  • The taxpayer had contracted with the care home as an agent of the company.
  • Where two employees are potentially liable for tax on a BIK it is not down to the employer to decide which one suffers the tax charge.
  • Instead, the definition of family / household in s721 ITEPA 2003 sets out a hierarchy with ‘spouse’ taking priority over ‘parent’.
  • The nursing home fees were therefore a BIK of the taxpayer’s father, and not her personally.
  • The other personal expenses were paid on account of dividends which were already included in the taxpayer’s return.


Certain parts of ITEPA do specifically identify which of two employees is liable to tax on a BIK, for example s69 where a car is made available to one employee and another employee is a member of their family / household. Other sections provide for a ‘just and reasonable’ apportionment.

No equivalent rules exist for the issue in the current case.  Interestingly the FTT resorted to interpreting the definition of ‘family or household’ as being a hierarchy, with ‘spouse’ at the top and ‘guest’ at the bottom.

This interpretation won’t resolve all such cases, especially where two siblings are employees of the same employer.  As the FTT noted this is a ‘matter for another day’.


Case reference: Sarah Baylis v HMRC [2016] TC 05454

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