Third Party Benefits

Revenue has received a number of queries from practitioners in relation to the income tax treatment of benefits provided to directors and employees by a third party (i.e. by a person other than his or her direct employer). While each case has to be examined on its merits having regard to the facts and circumstances of the case, the following is Revenue’s position vis a vis income tax on what are colloquially known as ‘third party benefits’.

(a)Cash / perquisites provided by third parties

If the ‘benefit’ is in the form of cash or is in the nature of a perquisite [i.e. that which can be turned to pecuniary account] or profit of whatever nature (e.g. vouchers, bonds, assets, etc.] and if such ‘benefit’ can be held to be from the employment or office, then it is Revenue’s view that such ‘benefit’ is within the charge to income tax under Section 112 TCA 1997.

(b)The use of cars & vans provided by third parties

A charge to income tax will arise under Section 121 or 121A TCA 1997 where a car or van is, by reason of the employee’s employment or the director’s office, made available (including by third parties) to the employee or director by a third party and is available for his or her private use.

(c) Benefits other than (a) or (b) above provided by third parties

Where a benefit other than (a) or (b) above is provided by a third party to a director or employee, a charge to income tax will not arise where:

• The provider of the benefit and the employer of the individual are not connected, either directly or indirectly, in any way, and
• There is no reciprocal arrangement or scheme in place between the third party and the employer or anyone connected with the employer, and
• The employer of the individual has not incurred, either directly or indirectly, any expense in relation to the benefit.

Revenue will, of course, challenge any tax avoidance schemes that seek to avoid or mitigate tax through the provision of benefits to employees and directors via third parties.