Office of Public Sector Information
PART 5 continued CHAPTER 2 continued
(1) A deduction for a payment is not allowed under section 346 if—
(a) the employee has ceased to hold the employment, and
(b) the payment is made after the day on which the employee ceased to hold the employment.
(2) If subsection (1) applies, see section 555 (former employee entitled to deduction from total income).
For the purposes of this Chapter each of the following kinds of liability is related to the employment—
A. Liability imposed upon the employee because he did an act, or failed to do an act—
in his capacity as holder of the employment, or
in any other capacity in which he acted in the performance of the duties of the employment.
B. Liability imposed upon the employee in connection with any proceedings relating to, or arising from, a claim that he is subject to a liability because he did an act, or failed to do an act—
in his capacity as holder of the employment, or
in any other capacity in which he acted in the performance of the duties of the employment.
(1) In section 346 “qualifying insurance contract” means a contract of insurance which meets conditions A, B, C and D.
(2) Condition A is that, so far as the risks insured against are concerned, the contract only relates to one or more of the following—
(a) the indemnification of an employee against a liability related to the employment,
(b) the indemnification of a person against vicarious liability in respect of a liability related to another person’s employment,
(c) the payment of costs or expenses incurred—
(i) in connection with a claim that a person is subject to a liability to which the insurance relates, or
(ii) in connection with any proceedings relating to or arising out of a claim that a person is subject to a liability to which the insurance relates,
(d) the indemnification of an employer against loss from a payment made by the employer to an employee in respect of—
(i) a liability related to the employment, or
(ii) any costs or expenses incurred as mentioned in paragraph (c).
(3) Condition B is that—
(a) the period of insurance under the contract does not exceed 2 years or, if it does, it does so only because of one or more renewals, each for a period of 2 years or less, and
(b) the insured is not required to renew the contract for any period.
(4) Condition C is—
(a) that the insured is not entitled under the contract to receive any payment or other benefit in addition to—
(i) cover for the risks insured against, and
(ii) any right to renew the contract, or
(b) if the insured is so entitled, that the part of the premium reasonably attributable to the entitlement is not a significant part of the whole premium.
(5) Condition D is that the contract is not connected with another contract.
(1) An insurance contract is connected with another contract for the purposes of section 349 if conditions E and F are met—
(a) at the time when both contracts are first in force, or
(b) at any time after that time.
(2) Condition E is that one of the contracts was entered into—
(a) by reference to the other, or
(b) with a view to enabling or facilitating entry into the other on particular terms.
(3) Condition F is that the terms on which one of the contracts was entered into are significantly different from what they would have been if—
(a) it had not been entered into in anticipation of the other being entered into, or
(b) the other had not also been entered into.
(4) If—
(a) there is only one such significant difference in terms, and
(b) the contracts meet conditions A, B and C specified in section 349,
the difference may be disregarded in the following cases.
(5) The first case is where the difference is a reduction in premiums under the contract that is reasonably attributable only to the contract—
(a) containing a right to renew, or
(b) being entered into by way of renewal.
(6) The second case is where—
(a) two or more contracts have been entered into as part of a single transaction, and
(b) the difference is reductions in their premiums that are reasonably attributable only to the premium under each of them having been fixed by reference to the appropriate proportion of the combined premium.
(7) In subsection (6) “the combined premium” means the amount that would have been the total premium under a single contract relating to all the risks covered by the contracts.
(1) A deduction is allowed from any earnings from any employment as a minister of a religious denomination for amounts incurred by the minister wholly, exclusively and necessarily in the performance of duties of such an employment.
(2) If a minister of a religious denomination pays rent in respect of a dwelling-house, part of which is used mainly and substantially for the purposes of such duties, a deduction is allowed from the minister’s earnings from any employment as such a minister for—
(a) one quarter of the rent, or
(b) if less, the part of the rent that, on a just and reasonable apportionment, is attributable to that part of the dwelling-house.
(3) If—
(a) an interest in premises belongs to a charity or an ecclesiastical corporation, and
(b) because of that interest and by reason of holding an employment as a minister of a religious denomination, the minister has a residence in the premises from which to perform the duties of the employment,
a deduction is allowed from the minister’s earnings from any such employment for part of any expenses borne by the minister on the maintenance, repair, insurance or management of the premises.
(4) The amount of the deduction is—
where—
A is the amount of the expenses borne by the minister on the maintenance, repair, insurance or management of the premises, and
B is the amount of those expenses that are allowed under subsection (1).
(5) In this section “charity” means a body of persons or trust established for charitable purposes only.
(6) Subsection (1) needs to be read with section 359 (disallowance of travel expenses: mileage allowances and reliefs).
(1) A deduction is allowed from earnings from an employment as an entertainer for agency fees (and any value added tax on them) if the fees are calculated as a percentage of the whole or part of the earnings from the employment.
This is subject to the limit in subsection (2).
(2) Amounts may be deducted under this section in calculating the net taxable earnings from an employment in a tax year only to the extent that, in aggregate, they do not exceed 17.5% of the taxable earnings from the employment in the tax year.
(3) Subsections (4) and (5) apply for the purposes of this section.
(4) “Entertainer” means an actor, dancer, musician, singer or theatrical artist.
(5) “Agency fees”, in relation to an employment, means—
(a) fees paid under a contract between the employee and another person, to whom the fees are paid, who—
(i) agrees under the contract to act as an agent of the employee in connection with the employment, and
(ii) at the time the fees are paid is carrying on an employment agency with a view to profit, and
(b) fees paid under an arrangement under which a co-operative society or the members of such a society agree to act as the employee’s agent in connection with the employment.
(6) For the purposes of subsection (5)—
“co-operative society” does not include a society which carries on or intends to carry on business with the object of making profits mainly for the payment of interest, dividends or bonuses on money invested or deposited with or lent to the society or any other person, and
“employment agency” has the meaning given by section 13(2) of the Employment Agencies Act 1973 (c. 35).
(1) A deduction is allowed from earnings charged on remittance for expenses within subsection (2) if the condition in subsection (3) is met.
(2) The expenses are—
(a) any expenses—
(i) paid by the employee out of the earnings, or
(ii) paid on the employee’s behalf by another person and included in the earnings, and
(b) any other expenses paid in the United Kingdom in the tax year or an earlier tax year in which the employee has been resident in the United Kingdom.
(3) The condition is that the expenses would have been deductible under sections 336 to 342 if the earnings had been earnings charged on receipt in the tax year in which the expenses were incurred.
(4) Where—
(a) any of the deductibility provisions refers to amounts or expenses that would be deductible from earnings if they were paid by a person, and
(b) the earnings in question are earnings charged on remittance,
it is assumed for the purposes of those provisions that the person pays the amounts or expenses out of those earnings.
(1) If the earnings from an employment for a tax year include both earnings charged on receipt and other earnings (except earnings charged under section 22), no deduction is allowed under sections 336 to 342 from the earnings charged on receipt for an amount paid in respect of duties of the employment to which the other earnings relate.
(2) If the earnings from an employment for a tax year include both earnings charged on remittance under section 26 and other earnings, no deduction is allowed under section 353 from the earnings charged on remittance for an amount paid in respect of duties of the employment to which the other earnings relate.
(3) This section is to be disregarded for the purposes of the deductibility provisions.
(1) An employee may make a claim to the Board of Inland Revenue under this section if conditions A to D are met.
(2) Condition A is that the employee is not domiciled in the United Kingdom.
(3) Condition B is that the employment is with a foreign employer.
(4) Condition C is that the employee has made a payment out of earnings from the employment.
(5) Condition D is that the payment does not reduce the employee’s liability to United Kingdom income tax, but was made in circumstances corresponding to those in which it would do so.
(6) If the Board are satisfied that conditions A to D are met, they may allow the payment as a deduction under this Chapter.
(1) No deduction from earnings is allowed under this Part for expenses incurred in providing entertainment or a gift in connection with the employer’s trade, business, profession or vocation.
(2) Subsection (1) is subject to the exceptions in—
(a) section 357 (exception where employer’s expenses disallowed), and
(b) section 358 (other exceptions).
(3) For the purposes of this section and those sections—
(a) “entertainment” includes hospitality of any kind, and
(b) expenses incurred in providing entertainment or a gift include expenses incurred in providing anything incidental to the provision of entertainment or a gift.
(1) The prohibition in section 356 on deducting expenses does not apply if—
(a) the earnings include an amount in respect of the expenses,
(b) the employer—
(i) paid the amount to, or on behalf of, the employee, or
(ii) put it at the employee’s disposal,
exclusively for meeting expenses incurred or to be incurred by the employee in providing the entertainment or gift, and
(c) condition A, B or C is met.
(2) Condition A is that the deduction of the amount falls to be disallowed under section 577 of ICTA in calculating the employer’s profits from the trade, profession or vocation in question for the purposes of the Tax Acts (or it would do so apart from the exemption in section 505(1)(e) of ICTA or any relief applying in respect of those profits).
(3) Condition B is that the inclusion of the amount falls to be disallowed under that section in calculating the employer’s expenses of management for the purposes of giving relief under the Tax Acts (or it would do so apart from another relief applying to the employer).
(4) Condition C is that—
(a) the employer is a tonnage tax company during the whole or part of the tax year, and
(b) apart from the tonnage tax election, the deduction of the amount included in the employee’s earnings would fall to be disallowed in calculating the employer’s relevant shipping profits.
(5) In subsection (4) “tonnage tax company”, “tonnage tax election” and “relevant shipping profits” have the same meaning as in Schedule 22 to FA 2000.
(1) The prohibition in section 356 on deducting expenses does not apply if the expenses are incurred in providing entertainment or gifts for the employer’s employees unless—
(a) they are also provided for others, and
(b) their provision for the employees is incidental to their provision for the others.
(2) For this purpose directors and persons engaged in the management of a company are regarded as employed by it.
(3) The prohibition in section 356 on deducting expenses does not apply if the expenses are incurred in providing a gift which incorporates a conspicuous advertisement for the employer or, if the employer is a company, another company which belongs to the same group as the employer, unless—
(a) the gift is food, drink, tobacco or a token or voucher exchangeable for goods, or
(b) the cost of the gift to the donor, together with any other gifts (except food, drink, tobacco or tokens or vouchers exchangeable for goods) given to the same person in the same tax year, is more than £50.
(4) In subsection (3) “group” means a body corporate and its 51% subsidiaries.
(1) No deduction may be made under the travel deductions provisions in respect of travel expenses incurred in connection with the use by the employee of a vehicle that is not a company vehicle if condition A or B is met.
(2) Condition A is that mileage allowance payments are made to the employee in respect of the use of the vehicle.
(3) Condition B is that mileage allowance relief is available in respect of the use of the vehicle by the employee (see section 231).
(4) In this section—
“company vehicle” has the meaning given by section 236(2),
“mileage allowance payments” has the meaning given by section 229(2), and
“the travel deductions provisions” means sections 337 to 342, 370, 371, 373 and 374 (travel expenses) and section 351 (expenses of ministers of religion).
(1) No deduction from earnings is allowed under this Chapter or section 373 (non-domiciled employee’s travel costs and expenses where duties performed in UK) for accommodation expenses incurred by a member of—
(a) the House of Commons,
(b) the Scottish Parliament,
(c) the National Assembly for Wales, or
(d) the Northern Ireland Assembly.
(2) In this section “accommodation expenses” means expenses incurred in, or in connection with, the provision or use of residential or overnight accommodation to enable the member to perform duties as a member of the Parliament or Assembly in or about—
(a) the place where it sits, or
(b) the constituency or region which the member represents.
A deduction from a person’s earnings is allowed under the following provisions of this Chapter where—
(a) the earnings include an amount treated as earnings under—
(i) Chapter 4 of Part 3 (taxable benefits: vouchers and credit-tokens),
(ii) Chapter 5 of Part 3 (taxable benefits: living accommodation), or
(iii) Chapter 10 of Part 3 (taxable benefits: residual liability to charge), and
(b) an amount in respect of the benefit in question would be deductible under Chapter 2 or 5 of this Part if the person had incurred and paid it.
(1) A deduction from earnings is allowed if—
(a) the earnings include an amount treated as earnings under section 87(1) (cash equivalent of benefit of non-cash voucher treated as earnings),
(b) the voucher is exchanged for goods or services (whether in the tax year or a later year), and
(c) had the employee incurred and paid the cost of the goods or services in the tax year, the whole or part of the amount paid would have been deductible from the earnings under Chapter 2 or 5 of this Part.
(2) The deduction is equal to the lesser of—
(a) the amount treated as earnings, and
(b) the amount that would have been so deductible.
(1) A deduction from earnings is allowed if—
(a) the earnings include an amount treated as earnings under section 94(1) (cash equivalent of benefit of credit-token treated as earnings), and
(b) had the employee incurred and paid the cost of the goods or services obtained by using the token, the whole or part of the amount paid would have been deductible from the earnings under Chapter 2 or 5 of this Part.
(2) The deduction is equal to the lesser of—
(a) the amount treated as earnings, and
(b) the amount that would have been so deductible.
(1) A deduction from earnings is allowed if—
(a) the earnings include an amount treated as earnings under Chapter 5 of Part 3 (taxable benefits: living accommodation), and
(b) had the employee incurred and paid an amount equal to that amount for the accommodation in the tax year, the whole or part of the amount paid would have been deductible under Chapter 2 or 5 of this Part.
(2) The deduction is equal to the amount that would have been so deductible.
(1) A deduction from earnings is allowed if—
(a) the earnings include an amount treated as earnings under Chapter 10 of Part 3 (taxable benefits: residual liability to charge) in respect of a benefit, and
(b) had the employee incurred and paid the cost of the benefit, the whole or part of the amount paid would have been deductible under Chapter 2 or 5 of this Part.
(2) The deduction is equal to the amount that would have been so deductible.
(3) For the purposes of this section, the cost of the benefit is determined in accordance with sections 204 to 206.
A deduction from an employee’s earnings for an amount is allowed under this Chapter where the amount has been fixed by the Treasury by reference to the employee’s employment.
(1) A deduction is allowed for the sum, if any, fixed by the Treasury as in their opinion representing the average annual expenses incurred by employees of the class to which the employee belongs in respect of the repair and maintenance of work equipment.
(2) The Treasury may only fix such a sum for a class of employees if they are satisfied that—
(a) the employees are generally responsible for the whole or part of the expense of repairing and maintaining the work equipment, and
(b) the expenses for which they are generally responsible would be deductible from the employees' earnings under section 336 if paid by them.
(3) No deduction is allowed under this section if the employer pays or reimburses the expenses in respect of which the sum is fixed or would do so if requested.
(4) If the employer pays or reimburses part of those expenses or would do so if requested, the amount of the deduction is reduced by the amount which is or would be paid or reimbursed.
(5) In this section “work equipment” means tools or special clothing.
(6) This section needs to be read with section 330(2) (prevention of double deductions).
(1) A deduction is allowed from earnings payable out of the public revenue for the employee’s fixed sum expenses in respect of the duties to which the earnings relate.
(2) “Fixed sum expenses” means the sum, if any, fixed by the Treasury as in their opinion representing the average annual expenses which employees of the employee’s description are obliged to pay wholly, exclusively and necessarily in the performance of duties to which such earnings relate.
(3) This section needs to be read with section 330(2) (prevention of double deductions).
(1) A deduction from a person’s earnings for an amount is allowed under the following provisions of this Chapter where the amount is included in the earnings in respect of—
(a) provision made for the person, or
(b) expenses reimbursed by another person.
(2) In this Chapter references to “the included amount” are references to the amount so included.
(3) If the included amount is an amount treated as earnings under—
(a) Chapter 4 of Part 3 (taxable benefits: vouchers and credit-tokens),
(b) Chapter 5 of Part 3 (taxable benefits: living accommodation), or
(c) Chapter 10 of Part 3 (taxable benefits: residual liability to charge),
a deduction may be allowed instead in respect of the benefit in question under Chapter 3 of this Part (deductions from benefits code earnings).
(1) A deduction is allowed from earnings which are taxable earnings under section 15 or 21 (earnings for year when employee resident and ordinarily resident in UK) if—
(a) the earnings include an amount in respect of—
(i) the provision of travel facilities for a journey made by the employee, or
(ii) the reimbursement of expenses incurred by the employee on such a journey, and
(b) the circumstances fall within Case A, B or C.
(2) The deduction is equal to the included amount.
(3) Case A is where—
(a) the employee is absent from the United Kingdom wholly and exclusively for the purpose of performing the duties of one or more employments,
(b) the duties concerned can only be performed outside the United Kingdom, and
(c) the journey is—
(i) a journey from a place outside the United Kingdom where such duties are performed to a place in the United Kingdom, or
(ii) a return journey following such a journey.
(4) Case B is where—
(a) the duties of the employment are performed partly outside the United Kingdom,
(b) those duties are not performed on a vessel,
(c) the journey is between a place in the United Kingdom and a place outside the United Kingdom where duties of the employment are performed,
(d) the duties performed outside the United Kingdom can only be performed there, and
(e) the journey is made wholly and exclusively for the purpose of performing them or returning after performing them.
(5) Case C is where—
(a) the duties of the employment are performed partly outside the United Kingdom,
(b) those duties are performed on a vessel,
(c) the journey is between a place in the United Kingdom and a place outside the United Kingdom where duties of the employment are performed,
(d) the duties performed outside the United Kingdom can only be performed there, and
(e) the journey is made wholly and exclusively for the purpose of performing those duties, or those duties and other duties of the employment, or returning after performing them.
(1) A deduction is allowed from earnings which are taxable earnings under section 15 or 21 (earnings for year when employee resident and ordinarily resident in UK) if—
(a) the earnings include an amount in respect of—
(i) the provision of travel facilities for a journey made by the employee’s spouse or child, or
(ii) the reimbursement of expenses incurred by the employee on such a journey, and
(b) conditions A to C are met.
Income Tax (Earnings and Pensions) Act 2003