What types of benefits are excluded from the recreational benefits exemption under section 262 of the Income Tax (Earnings and Pensions) Act 2003?

Section 262 excludes the use of or interest in mechanically propelled vehicles (including ships, boats, aircraft and hovercraft), holiday or overnight accommodation and associated facilities, and facilities provided on domestic premises. A right or opportunity to use any of these excluded facilities is also excluded from the section 261 exemption.

How broadly is 'vehicle' defined for the purposes of section 262?

The definition of vehicle under section 262 is very broad. It covers not only cars, motorcycles and other road vehicles but also ships, boats, other vessels, aircraft and hovercraft. Therefore, employer-provided recreational use of a yacht or light aircraft falls outside the section 261 exemption and is taxable as a benefit in kind.

What are 'domestic premises' for the purposes of the recreational benefits exclusion?

Domestic premises means premises used wholly or mainly as a private dwelling, together with any land or other premises belonging to or enjoyed with such a dwelling. Recreational facilities provided on domestic premises, such as those installed at an employee's private home, are excluded from the section 261 recreational benefits exemption.

Is employer-provided holiday accommodation exempt from income tax under the recreational benefits rules?

No. Section 262 specifically excludes holiday or overnight accommodation and any facilities associated with such accommodation from the recreational benefits exemption under section 261. The value of employer-provided holiday accommodation, such as a company-owned holiday cottage, must be reported and taxed as a benefit in kind under normal rules.

Income Tax (Earnings and Pensions) Act 2003 section 262

Benefits not exempted by section 261

Section 262 identifies certain types of benefits that are specifically excluded from the recreational benefits exemption provided by section 261.

The exemption for recreational benefits does not cover the use of or interest in mechanically propelled vehicles (including ships, boats, aircraft and hovercraft), holiday or overnight accommodation, or facilities associated with such accommodation.
Facilities provided on domestic premises — meaning premises used mainly as a private dwelling, or land and other premises belonging to or enjoyed with such a dwelling — are also excluded from the exemption.
A right or opportunity to make use of any of these excluded facilities is itself excluded from the exemption.
The definition of "vehicle" is broad, covering not just road vehicles but also ships, boats, other vessels, aircraft and hovercraft.

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