Pepper v Hart & others

The case centred on income from employment, benefits in kind and the valuation of the cash equivalent of a benefit

HL 1992, 65 TC 421; [1992] STC 898; [1992] 3 WLR 1032; [1993] 1 All ER 42

This case involved a private school which had been unable to fill all of its places. Consequently, it allowed some teachers to send their own children to the school at a subsidised price.

It was agreed that the provision of the school places was a taxable benefit but the taxpayer and HMRC disagreed over the cost of providing the benefit.

The Inland Revenue argued that the average cost should be used, ie the total running costs of the school divided by the number of pupils; the taxpayer argued that the marginal cost, ie the additional cost of providing the extra places, should be used.

It was held that the marginal cost basis was the correct method of calculating the benefit in kind.

An important point to be established in this case was that it was held that Hansard could be used as an aid to interpretation where 'legislation is ambiguous or obscure, or leads to an absurdity; the material relied upon consists of one or more statements by a Minister or other promoter of the Bill together if necessary with such other Parliamentary material as is necessary to understand such statements and their effect; and the statements relied upon are clear'.

Read EIM21110 - The benefits code: cash equivalent of benefits