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(1) This Part provides for deductions that are allowed from the taxable earnings from an employment in a tax year in calculating the net taxable earnings from the employment in the tax year for the purposes of Part 2 (see section 11(1)).
(2) In this Part, unless otherwise indicated by the context—
(a) references to the earnings from which deductions are allowed are references to the taxable earnings mentioned in subsection (1), and
(b) references to the tax year are references to the tax year mentioned there.
(3) The deductions for which this Part provides are those allowed under—
Chapter 2 (deductions for employee’s expenses),
Chapter 3 (deductions from benefits code earnings),
Chapter 4 (fixed allowances for employee’s expenses),
Chapter 5 (deductions for earnings representing benefits or reimbursed expenses), and
Chapter 6 (deductions from seafarers' earnings).
(4) Further provision about deductions from earnings is made in—
section 232 (giving effect to mileage allowance relief),
section 619 of ICTA (contributions under retirement annuity contracts), and
section 262 of CAA 2001 (capital allowances to be given effect by treating them as deductions from earnings).
(5) Further provision about deductions from income including earnings is made in—
Part 12 (payroll giving),
section 592(7) of ICTA (contributions to exempt approved schemes), and
section 594(1) of ICTA (contributions to exempt statutory schemes).
(1) The general rule is that deductions under this Part are allowed—
(a) from any earnings from the employment in question, and
(b) not from earnings from any other employment.
This is subject to subsections (2) to (4).
(2) Deductions under section 351 (expenses of ministers of religion) are allowed from earnings from any employment as a minister of a religious denomination.
(3) Deductions under section 368 (fixed sum deductions from earnings payable out of public revenue) are allowed only from earnings payable out of the public revenue.
(4) Deductions limited to specified earnings (see subsection (5)) are allowed—
(a) only from earnings from the employment that are taxable earnings under certain of the charging provisions of Chapters 4 and 5 of Part 2, and
(b) not from other earnings from it.
(5) “Deductions limited to specified earnings” are deductions under—
sections 336 to 342 (deductions from earnings charged on receipt: see sections 335(2) and 354),
section 353 (deductions from earnings charged on remittance),
sections 370 to 374 (travel deductions from earnings charged on receipt), and
Chapter 6 of this Part (deductions from seafarers' earnings: see section 378(1)(a)).
(1) The amount of a deduction allowed under this Part may not exceed the earnings from which it is deductible.
(2) If two or more deductions allowed under this Part are deductible from the same earnings, the amounts deductible may not in aggregate exceed those earnings.
(3) If deductions allowed otherwise than under this Part fall to be allowed from the same earnings as amounts deductible under this Part, the amounts deductible under this Part may not exceed the earnings remaining after the other deductions.
(4) Subsections (1) and (2) do not apply to a deduction under section 351 (expenses of ministers of religion), and subsection (3) applies as if such a deduction were allowed otherwise than under this Part.
(5) This section is to be disregarded for the purposes of the deductibility provisions (see section 332).
(6) See also section 380 of ICTA (which provides that where a loss in an employment is sustained, relief may be given against other income).
(1) A deduction from earnings under this Part is not allowed more than once in respect of the same costs or expenses.
(2) If apart from this subsection—
(a) a deduction would be allowed under Chapter 4 of this Part (fixed allowances for employee’s expenses) for a sum fixed by reference to any kind of expenses, and
(b) the employee would be entitled under another provision to a deduction for an amount paid in respect of the same kind of expenses,
only one of those deductions is allowed.
(1) This Part needs to be read with section 835(3) and (4) of ICTA (general rule that deductions are to be allowed in the order resulting in the greatest reduction of liability to income tax).
(2) In the case of deductions under this Part, the general rule in that section is subject to—
(a) section 23(3) (which requires certain deductions to be made in order to establish “chargeable overseas earnings”), and
(b) section 381 (which requires deductions under other provisions to be taken into account before deductions under Chapter 6 of this Part (seafarers)).
For the purposes of this Part, “the deductibility provisions” means the following provisions (which refer to amounts or expenses that would be deductible if they were incurred and paid by an employee)—
the definition of “business travel” in section 171(1) (definitions for Chapter 6 of Part 3),
section 179(6) (exception for certain advances for necessary expenses),
the definition of “business travel” in section 236(1) (definitions for Chapter 2 of Part 4),
section 240(1)(c) and (5) (exemption of incidental overnight expenses and benefits),
section 252(3) (exception from exemption of work-related training provision for non-deductible travel expenses),
section 257(3) (exception from exemption for individual learning account training provision for non-deductible travel expenses),
section 305(5) (offshore oil and gas workers: mainland transfers),
section 310(6)(b) (counselling and other outplacement services),
section 311(5)(b) (retraining courses),
section 361(b) (scope of Chapter 3 of this Part: cost of benefits deductible as if paid by employee),
section 362(1)(c) and (2)(b) (deductions where non-cash voucher provided),
section 363(1)(b) and (2)(b) (deductions where credit-token provided),
section 364(1)(b) and (2) (deductions where living accommodation provided),
section 365(1)(b) and (2) (deductions where employment-related benefit provided).
(1) A deduction from a person’s earnings for an amount is allowed under the following provisions of this Chapter only if the amount—
(a) is paid by the person, or
(b) is paid on the person’s behalf by someone else and is included in the earnings.
(2) In the following provisions of this Chapter, in relation to a deduction from a person’s earnings, references to the person paying an amount include references to the amount being paid on the person’s behalf by someone else if or to the extent that the amount is included in the earnings.
(3) Subsection (1)(b) does not apply to the deductions under—
(a) section 351(2) and (3) (expenses of ministers of religion), and
(b) section 355 (deductions for corresponding payments by non-domiciled employees with foreign employers),
and subsection (2) does not apply in the case of those deductions.
(4) Chapter 3 of this Part provides for deductions where—
(a) a person’s earnings include an amount treated as earnings under Chapter 4, 5 or 10 of Part 3 (taxable benefits: vouchers etc., living accommodation and residual liability to charge), and
(b) an amount in respect of the benefit in question would be deductible under this Chapter if the person had incurred and paid it.
(1) For the purposes of this Chapter, a person may be regarded as paying an amount despite—
(a) its reimbursement, or
(b) any other payment from another person in respect of the amount.
(2) But where a reimbursement or such other payment is made in respect of an amount, a deduction for the amount is allowed under the following provisions of this Chapter only if or to the extent that—
(a) the reimbursement, or
(b) so much of the other payment as relates to the amount,
is included in the person’s earnings.
(3) This section does not apply to a deduction allowed under section 351 (expenses of ministers of religion).
(4) This section is to be disregarded for the purposes of the deductibility provisions.
(1) The availability of certain deductions under this Chapter depends on whether the earnings are earnings charged on receipt or earnings charged on remittance.
(2) Sections 336 to 342—
(a) only apply if the earnings from which the deduction is to be made are earnings charged on receipt, and
(b) apply subject to section 354(1) if the earnings from the employment also include other earnings.
(3) Section 353 (which provides for a deduction for expenses of the kind to which sections 336 to 342 apply)—
(a) only applies if the earnings from which the deduction is to be made are earnings charged on remittance, and
(b) applies subject to section 354(2) if the earnings from the employment also include other earnings.
(4) In this Part—
“earnings charged on receipt” means earnings which are taxable earnings under section 15, 21, 25 or 27, and
“earnings charged on remittance” means earnings which are taxable earnings under section 22 or 26.
(1) The general rule is that a deduction from earnings is allowed for an amount if—
(a) the employee is obliged to incur and pay it as holder of the employment, and
(b) the amount is incurred wholly, exclusively and necessarily in the performance of the duties of the employment.
(2) The following provisions of this Chapter contain additional rules allowing deductions for particular kinds of expenses and rules preventing particular kinds of deductions.
(3) No deduction is allowed under this section for an amount that is deductible under sections 337 to 342 (travel expenses).
(1) A deduction from earnings is allowed for travel expenses if—
(a) the employee is obliged to incur and pay them as holder of the employment, and
(b) the expenses are necessarily incurred on travelling in the performance of the duties of the employment.
(2) This section needs to be read with section 359 (disallowance of travel expenses: mileage allowances and reliefs).
(1) A deduction from earnings is allowed for travel expenses if—
(a) the employee is obliged to incur and pay them as holder of the employment, and
(b) the expenses are attributable to the employee’s necessary attendance at any place in the performance of the duties of the employment.
(2) Subsection (1) does not apply to the expenses of ordinary commuting or travel between any two places that is for practical purposes substantially ordinary commuting.
(3) In this section “ordinary commuting” means travel between—
(a) the employee’s home and a permanent workplace, or
(b) a place that is not a workplace and a permanent workplace.
(4) Subsection (1) does not apply to the expenses of private travel or travel between any two places that is for practical purposes substantially private travel.
(5) In subsection (4) “private travel” means travel between—
(a) the employee’s home and a place that is not a workplace, or
(b) two places neither of which is a workplace.
(6) This section needs to be read with section 359 (disallowance of travel expenses: mileage allowances and reliefs).
(1) In this Part “workplace”, in relation to an employment, means a place at which the employee’s attendance is necessary in the performance of the duties of the employment.
(2) In this Part “permanent workplace”, in relation to an employment, means a place which—
(a) the employee regularly attends in the performance of the duties of the employment, and
(b) is not a temporary workplace.
This is subject to subsections (4) and (8).
(3) In subsection (2) “temporary workplace”, in relation to an employment, means a place which the employee attends in the performance of the duties of the employment—
(a) for the purpose of performing a task of limited duration, or
(b) for some other temporary purpose.
This is subject to subsections (4) and (5).
(4) A place which the employee regularly attends in the performance of the duties of the employment is treated as a permanent workplace and not a temporary workplace if—
(a) it forms the base from which those duties are performed, or
(b) the tasks to be carried out in the performance of those duties are allocated there.
(5) A place is not regarded as a temporary workplace if the employee’s attendance is—
(a) in the course of a period of continuous work at that place—
(i) lasting more than 24 months, or
(ii) comprising all or almost all of the period for which the employee is likely to hold the employment, or
(b) at a time when it is reasonable to assume that it will be in the course of such a period.
(6) For the purposes of subsection (5), a period is a period of continuous work at a place if over the period the duties of the employment are performed to a significant extent at the place.
(7) An actual or contemplated modification of the place at which duties are performed is to be disregarded for the purposes of subsections (5) and (6) if it does not, or would not, have any substantial effect on the employee’s journey, or expenses of travelling, to and from the place where they are performed.
(8) An employee is treated as having a permanent workplace consisting of an area if—
(a) the duties of the employment are defined by reference to an area (whether or not they also require attendance at places outside it),
(b) in the performance of those duties the employee attends different places within the area,
(c) none of the places the employee attends in the performance of those duties is a permanent workplace, and
(d) the area would be a permanent workplace if subsections (2), (3), (5), (6) and (7) referred to the area where they refer to a place.
(1) A deduction from earnings from an employment is allowed for travel expenses if conditions A to D are met.
(2) Condition A is that the employee is obliged to incur and pay the expenses.
(3) Condition B is that the travel is for the purpose of performing duties of the employment at the destination.
(4) Condition C is that the employee has performed duties of another employment at the place of departure.
(5) Condition D is that the employments are with companies in the same group.
(6) In this section “group” means a company and its 51% subsidiaries.
(7) For the purposes of sections 353 and 354 (special rules for earnings with a foreign element), the expenses are treated as incurred in the performance of the duties to be performed at the destination.
(8) This section needs to be read with section 359 (disallowance of travel expenses: mileage allowances and reliefs).
(1) A deduction from earnings from an employment is allowed for starting travel expenses and finishing travel expenses if conditions A to C are met.
(2) Condition A is that the duties of the employment are performed wholly outside the United Kingdom.
(3) Condition B is that the employee is resident and ordinarily resident in the United Kingdom.
(4) Condition C is that in a case where the employer is a foreign employer, the employee is domiciled in the United Kingdom.
(5) If the travel is only partly attributable to the taking up or termination of the employment, this section applies only to the part of the expenses properly so attributable.
(6) Subsection (7) applies if in the tax year the employment is in substance one whose duties fall to be performed outside the United Kingdom.
(7) Duties of the employment performed in the United Kingdom, whose performance is merely incidental to the performance of duties outside the United Kingdom, are to be treated for the purposes of subsection (2) as performed outside the United Kingdom.
(8) In this section—
“starting travel expenses” means expenses incurred by the employee in travelling from a place in the United Kingdom to take up the employment,
“finishing travel expenses” means expenses incurred by the employee in travelling to a place in the United Kingdom on the termination of the employment, and
“employee” includes a person who is to be, or has ceased to be, an employee.
(9) This section needs to be read with section 359 (disallowance of travel expenses: mileage allowances and reliefs).
(1) A deduction from earnings from an employment is allowed for travel expenses incurred by the employee if conditions A to F are met.
(2) Condition A is that the travel is for the purpose of performing duties of the employment at the destination.
(3) Condition B is that the employee has performed duties of another employment at the place of departure.
(4) Condition C is that the place of departure or the destination or both are outside the United Kingdom.
(5) Condition D is that the duties of one or both of the employments are performed wholly or partly outside the United Kingdom.
(6) Condition E is that the employee is resident and ordinarily resident in the United Kingdom.
(7) Condition F is that in a case where the employer is a foreign employer, the employee is domiciled in the United Kingdom.
(8) If the travel is only partly attributable to the purpose of performing duties of the employment at the destination, this section applies only to the part of the expenses properly so attributable.
(9) This section needs to be read with section 359 (disallowance of travel expenses: mileage allowances and reliefs).
(1) A deduction from earnings from an employment is allowed for an amount paid in respect of a professional fee if—
(a) the duties of the employment involve the practice of the profession to which the fee relates, and
(b) the registration, certification, licensing or other matter in respect of which the fee is payable is a condition, or one of alternative conditions, which must be met if that profession is to be practised in the performance of those duties.
(2) In this section “professional fee” means a fee mentioned in the following Table.
Table
Health professionals
1. Fee payable for entry or retention of a name in any of the following—
the Register of Chartered Psychologists,
the register maintained by the Registrar of Chiropractors,
a roll or record kept for a class of dental auxiliaries,
the dentists register,
the register of dispensing opticians,
the register maintained by the Health Professions Council,
the register maintained by the registrar appointed by the Hearing Aid Council,
the register of medical practitioners,
the register maintained by the Nursing and Midwifery Council,
either of the registers of opthalmic opticians,
the register maintained by the Registrar of Osteopaths,
the Register of Pharmaceutical Chemists.
2. Fee payable by a chartered psychologist on the issue of a practising certificate.
Animal health professionals
3. Fee payable for entry or retention of a name in any of the following—
the register maintained by the registrar appointed by the Farriers Registration Council,
the supplementary veterinary register,
the register of veterinary surgeons.
Legal professionals
4. Fee payable to the Council for Licensed Conveyancers on the issue of a licence to practise as a licensed conveyancer.
5. Fee and contribution to the compensation fund or Guarantee Fund payable on the issue of a solicitor’s practising certificate.
Architects
6. Fee payable for entry or retention of a name in the Register of Architects.
Teachers
7. Fee payable for entry or retention of a name in any of the following—
the register maintained by the General Teaching Council for England,
the register maintained by the General Teaching Council for Scotland,
the register maintained by the General Teaching Council for Wales.
Patent agents and trade mark agents
8. Registration fee payable by—
a registered patent agent,
a registered trade mark agent.
9. Practising fee payable by—
a registered patent agent,
a registered trade mark agent.
Occupations in the transport sector
10. Fee payable by a driving instructor for entry or retention of a name in the register of approved instructors or on the issue or renewal of a licence authorising its holder to give paid instruction in the driving of a motor car.
11. Fee (including any related medical or technical examination fee) payable, on the issue or renewal of a licence by the Civil Aviation Authority, by—
an aircraft maintenance engineer,
an air traffic controller or student air traffic controller,
a member of the flight crew of an aircraft registered in the United Kingdom,
a flight information service officer.
12. Fee (including any related medical examination fee) payable—
on the issue or renewal of a licence authorising its holder to drive a large goods vehicle or a passenger-carrying vehicle,
by an officer or other seaman on the issue, renewal or endorsement of a certificate, licence or other document which is required as evidence of his qualification or competence to serve in a ship.
13. Fee payable by a seafarer employed in a sea-going United Kingdom ship on the issue or renewal of a medical fitness certificate.
(3) The Board of Inland Revenue may make an order adding such fee as is specified in the order to the Table of fees mentioned in subsection (2).
(4) The Board may make an order if they consider that such fee is payable in respect of any registration, certification, licensing or other matter if it is required as a condition, or one of alternative conditions, of the practice of a profession.
(1) A deduction from earnings from an employment is allowed for an amount paid in respect of an annual subscription if—
(a) it is paid to a body of persons approved under this section, and
(b) the activities of the body which are directed to one or more of the objects within subsection (2) are of direct benefit to, or concern the profession practised in, the performance of the duties of the employment.
(2) The objects are—
(a) the advancement or dissemination of knowledge (whether generally or among persons belonging to the same or similar professions or occupying the same or similar positions),
(b) the maintenance or improvement of standards of conduct and competence among the members of a profession,
(c) the provision of indemnity or protection to members of a profession against claims in respect of liabilities incurred by them in the exercise of their profession.
(3) The Inland Revenue may approve a body of persons under this section if, on an application by the body, they are satisfied that—
(a) the body is not of a mainly local character,
(b) its activities are carried on otherwise than for profit, and
(c) its activities are wholly or mainly directed to objects within subsection (2).
(4) The Inland Revenue must give notice to the body of their decision on the application.
(5) If the activities of the body are to a significant extent directed to objects other than objects within subsection (2), the Inland Revenue may—
(a) determine the proportion of the activities directed to objects within subsection (2), and
(b) determine that only such corresponding part of the subscription as is specified by the Inland Revenue is allowable under this section.
(6) In determining that part, the Inland Revenue must have regard to the proportion of expenditure of the body attributable to objects other than objects within subsection (2) and all other relevant circumstances.
(7) If a body applies for approval under this section and is approved, a subscription paid to it—
(a) before it has applied but in the same tax year as the application, or
(b) after it has applied but before it is approved,
is treated for the purposes of this section as having been paid to an approved body.
(1) The Inland Revenue may by notice to the body in question—
(a) withdraw an approval given under section 344, and
(b) withdraw or vary a determination made under that section,
to take account of any change in circumstances.
(2) A body aggrieved by a decision of the Inland Revenue under section 344 or subsection (1) may appeal to the Special Commissioners.
(3) The notice of appeal must be given to the Inland Revenue within 30 days after the date on which notice of their decision was given to the body.
(1) A deduction from earnings from an employment is allowed for any or all of the following—
A. Payment in or towards the discharge of a liability related to the employment.
B. Payment of any costs or expenses incurred in connection with—
a claim that the employee is subject to a liability related to the employment, or
proceedings relating to or arising out of a claim that the employee is subject to a liability related to the employment.
C. Payment of a premium under a qualifying insurance contract, but only to the extent that the premium relates to—
provision in the contract for the employee to be indemnified against a payment falling within paragraph A, or
provision in the contract for the payment of any costs or expenses falling within paragraph B.
(2) But a deduction is not allowed for a payment which falls within paragraph A or B if it would be unlawful for the employer to enter into a contract of insurance in respect of the liability, or costs or expenses, in question.
(3) In this Chapter—
(a) “premium”, in relation to a qualifying insurance contract, means an amount payable to the insurer under the contract, and
(b) where a qualifying insurance contract relates to more than one person, employment or risk, the part of the premium to be treated as relating to each of them is to be determined by apportionment on a just and reasonable basis.
Income Tax (Earnings and Pensions) Act 2003