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Income Tax (Earnings and Pensions) Bill


Income Tax (Earnings and Pensions) Bill
Part 3 — Employment income: earnings and benefits etc. treated as earnings
Chapter 12 — Payments treated as earnings

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                  (ii)                one or more persons other than P (apart from the director)

account to the Board of Inland Revenue for some or all of the

deductible tax.

     (2)    For the purposes of this section it does not matter whether the director’s

employment is held at the time when P makes the payment mentioned in

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subsection (1)(a) so long as it is held at some point in the tax year in which the

payment is made.

     (3)    References in this section to employment as a director accordingly include

prospective or past employment as a director.

     (4)    The deductible tax accounted for to the Board of Inland Revenue is to be

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treated as earnings of the director from the director’s employment for the tax

year in which it is accounted for.

     (5)    But if—

           (a)           the deductible tax is accounted for after the director’s employment has

ceased, and

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           (b)           the employment ceased in a tax year before the one in which the

deductible tax is accounted for,

            the deductible tax is treated as earnings for the tax year in which the director’s

employment ceased.

     (6)    The following rules apply to the calculation of the amount to be treated as

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earnings under this section—

           (a)           any amount accounted for after the death of the director is to be

disregarded;

           (b)           if P deducts some of the deductible tax, the amount treated as earnings

is reduced by the amount deducted;

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           (c)           if the director makes good to P or to another person some or all of the

deductible tax which P or the other person accounts for, the amount

treated as earnings is reduced by the amount made good.

     (7)    This section does not apply if the director has no material interest in the

company and either—

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           (a)           the director is employed as a full-time working director of the

company, or

           (b)           the company is—

                  (i)                 non-profit-making, or

                  (ii)                established for charitable purposes only.

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     (8)    In this section—

                    “director” has the same meaning as in the benefits code (see section 67);

                    “director’s employment”, in relation to a person who is employed as a

director, means that employment;

                    “full-time working director” has the same meaning as in the benefits code

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(see section 67);

                    “material interest” has the same meaning as in the benefits code (see

section 68);

                    “non-profit-making”, in relation to a company, means that—

                  (a)                 the company does not carry on a trade, and

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                  (b)                 its functions do not consist wholly or mainly in the holding of

investments or other property.

 

 

Income Tax (Earnings and Pensions) Bill
Part 3 — Employment income: earnings and benefits etc. treated as earnings
Chapter 12 — Payments treated as earnings

    110

 

 224   Payments to non-approved personal pension arrangements

     (1)    Contributions paid by an employer under non-approved personal pension

arrangements made by the employee are to be treated as earnings from the

employment for the tax year in which they are paid.

     (2)    Subsection (1) does not apply if or to the extent that the contributions are

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chargeable to income tax as the employee’s income apart from this section.

     (3)    For the purposes of this section—

           (a)           “personal pension arrangements” has the meaning given by section

630(1) of ICTA, and

           (b)           arrangements are “non-approved” if they are not “approved” within

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the meaning of that section.

 225   Payments for restrictive undertakings

     (1)    This section applies where—

           (a)           an individual gives a restrictive undertaking in connection with the

individual’s current, future or past employment, and

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           (b)           a payment is made in respect of—

                  (i)                 the giving of the undertaking, or

                  (ii)                the total or partial fulfilment of the undertaking.

     (2)    It does not matter to whom the payment is made.

     (3)    The payment is to be treated as earnings from the employment for the tax year

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in which it is made.

     (4)    Subsection (3) does not apply if the payment constitutes earnings from the

employment by virtue of any other provision.

     (5)    A payment made after the death of the individual who gave the undertaking

is treated for the purposes of this section as having been made immediately

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before the death.

     (6)    This section applies only where—

           (a)           the earnings from the employment are general earnings to which any

of the provisions mentioned in subsection (7) apply, or

           (b)           if there were general earnings from the employment they would be

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general earnings to which any of those provisions apply.

     (7)    The provisions are—

           (a)           section 15 (earnings of employee resident, ordinarily resident and

domiciled in the UK),

           (b)           section 21 (earnings of employee resident and ordinarily resident, but

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not domiciled, in UK, except chargeable overseas earnings),

           (c)           section 25 (UK-based earnings of employee resident but not ordinarily

resident in UK), and

           (d)           section 27 (UK-based earnings of employee not resident in UK).

     (8)    In this section “restrictive undertaking” means an undertaking which restricts

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the individual’s conduct or activities.

            For this purpose it does not matter whether or not the undertaking is legally

enforceable or is qualified.

 

 

Income Tax (Earnings and Pensions) Bill
Part 4 — Employment income: exemptions
Chapter 1 — Exemptions: general

    111

 

 226   Valuable consideration given for restrictive undertakings

     (1)    In a case where—

           (a)           an individual gives a restrictive undertaking in connection with the

individual’s current, future or past employment, and

           (b)           valuable consideration that is not in the form of money is provided in

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respect of—

                  (i)                 the giving of the undertaking, or

                  (ii)                the total or partial fulfilment of the undertaking,

            section 225 applies as it would if a payment of an amount equal to the value of

the consideration had been made instead.

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     (2)    For this purpose—

           (a)           merely assuming an obligation to make over or provide valuable

property, rights or advantages is not valuable consideration, but

           (b)           wholly or partially discharging such an obligation is.

Part 4

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Employment income: exemptions

Chapter 1

Exemptions: general

 227   Scope of Part 4

     (1)    This Part contains—

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           (a)           earnings-only exemptions, and

           (b)           employment income exemptions.

     (2)    In this Act “earnings-only exemption” means an exemption from income tax

which—

           (a)           prevents liability to tax arising in respect of earnings, either by virtue of

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one or more particular provisions (such as a Chapter of the benefits

code) or at all, and

           (b)           does not prevent liability to tax arising in respect of other employment

income.

     (3)    In this Act “employment income exemption” means an exemption from

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income tax which prevents liability to tax arising in respect of employment

income of any kind at all.

     (4)    The following provisions in Part 7 also confer exemption from liability to

income tax in respect of earnings—

           (a)           section 426 (conditional interests in shares: no charge in respect of

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acquisition of employee’s interest in certain circumstances),

           (b)           section 474 (share options: no charge in respect of receipt of shorter-

term option),

           (c)           sections 489 to 493 and sections 496 to 499 (approved share incentive

plans),

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           (d)           section 518 (approved SAYE option schemes: no charge in respect of

receipt of option),

 

 

Income Tax (Earnings and Pensions) Bill
Part 4 — Employment income: exemptions
Chapter 2 — Exemptions: mileage allowances and passenger payments

    112

 

           (e)           section 519 (approved SAYE option schemes: no charge in respect of

exercise of option),

           (f)           section 523 (approved CSOP schemes: no charge in respect of receipt of

option),

           (g)           section 524 (approved CSOP schemes: no charge in respect of exercise

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of option),

           (h)           section 528 (enterprise management incentives: no charge on receipt of

qualifying option),

           (i)           section 542 (priority share allocations: exemption where offer made to

public and employees), and

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           (j)           section 544 (priority share allocations: exemption where different offers

made to public and employees).

 228   Effect of exemptions on liability under provisions outside Part 2

     (1)    The exemptions conferred by the provisions specified in subsection (2) prevent

liability to income tax arising under any enactment, but the other exemptions

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in this Part only affect liability to income tax under Part 2 of this Act.

     (2)    The provisions referred to in subsection (1) are—

           (a)           section 245 (travelling and subsistence during public transport strikes),

           (b)           section 248 (transport home: late night working and failure of car-

sharing arrangements),

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           (c)           section 264 (annual parties and functions),

           (d)           Chapter 8 of this Part (exemptions for special kinds of employees)

except for sections 290 and 291,

           (e)           section 323 (long service awards),

           (f)           section 324 (small gifts from third parties), and

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           (g)           section 326 (expenses incidental to transfer of a kind not normally met

by transferor).

Chapter 2

Exemptions: mileage allowances and passenger payments

Mileage allowances

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 229    Mileage allowance payments

     (1)    No liability to income tax arises in respect of approved mileage allowance

payments for a vehicle to which this Chapter applies (see section 235).

     (2)    Mileage allowance payments are amounts, other than passenger payments (see

section 233), paid to an employee for expenses related to the employee’s use of

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such a vehicle for business travel (see section 236(1)).

     (3)    Mileage allowance payments are approved if, or to the extent that, for a tax

year, the total amount of all such payments made to the employee for the kind

of vehicle in question does not exceed the approved amount for such payments

applicable to that kind of vehicle (see section 230).

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     (4)    Subsection (1) does not apply if—

           (a)           the employee is a passenger in the vehicle, or

 

 

Income Tax (Earnings and Pensions) Bill
Part 4 — Employment income: exemptions
Chapter 2 — Exemptions: mileage allowances and passenger payments

    113

 

           (b)           the vehicle is a company vehicle (see section 236(2)).

 230   The approved amount for mileage allowance payments

     (1)    The approved amount for mileage allowance payments that is applicable to a

kind of vehicle is—equation: cross[char[M],char[R]]

            where—

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                    M is the number of miles of business travel by the employee (other than

as a passenger) using that kind of vehicle in the tax year in question;

                    R is the rate applicable to that kind of vehicle.

     (2)    The rates applicable are as follows—

 

Kind of vehicle

Rate per mile

 

10

 

Car or van

40p for the first 10,000 miles

 
  

25p after that

 
 

Motor cycle

24p

 
 

Cycle

20p

 

     (3)    The reference in subsection (2) to “the first 10,000 miles” is to the total number

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of miles of business travel in relation to the employment, or any associated

employment, by car or van in the tax year in question.

     (4)    One employment is associated with another if—

           (a)           the employer is the same;

           (b)           the employers are partnerships or bodies and an individual or another

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partnership or body has control over both of them; or

           (c)           the employers are associated companies within the meaning of section

416 of ICTA.

     (5)    In subsection (4)(b)—

           (a)           “control”, in relation to a body corporate or partnership, has the

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meaning given by section 840 of ICTA (in accordance with section 719

of this Act), and

           (b)           the definition of “control” in that section of that Act applies (with the

necessary modifications) in relation to an unincorporated association as

it applies in relation to a body corporate.

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     (6)    The Treasury may by regulations amend subsection (2) so as to alter the rates

or rate bands.

 231   Mileage allowance relief

     (1)    An employee is entitled to mileage allowance relief for a tax year—

           (a)           if the employee uses a vehicle to which this Chapter applies for

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business travel, and

 

 

Income Tax (Earnings and Pensions) Bill
Part 4 — Employment income: exemptions
Chapter 2 — Exemptions: mileage allowances and passenger payments

    114

 

           (b)           the total amount of all mileage allowance payments, if any, made to the

employee for the kind of vehicle in question for the tax year is less than

the approved amount for such payments applicable to that kind of

vehicle.

     (2)    The amount of mileage allowance relief to which an employee is entitled for a

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tax year is the difference between—

           (a)           the total amount of all mileage allowance payments, if any, made to the

employee for the kind of vehicle in question, and

           (b)           the approved amount for such payments applicable to that kind of

vehicle.

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     (3)    Subsection (1) does not apply if—

           (a)           the employee is a passenger in the vehicle, or

           (b)           the vehicle is a company vehicle.

 232   Giving effect to mileage allowance relief

     (1)    A deduction is allowed for mileage allowance relief to which an employee is

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entitled for a tax year.

     (2)    If any of the employee’s earnings—

           (a)           are taxable earnings in the tax year in which the employee receives

them, and

           (b)           are not also taxable earnings in that year that fall within subsection (3),

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            the relief is allowed as a deduction from those earnings in calculating net

taxable earnings in the year.

     (3)    If any of the employee’s earnings are taxable earnings in the tax year in which

the employee remits them to the United Kingdom, there may be deducted from

those earnings the amount of any mileage allowance relief—

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           (a)           for that tax year, and

           (b)           for any earlier tax year in which the employee was resident in the

United Kingdom,

            which, on the assumptions mentioned in subsection (4), would have been

deductible under subsection (2).

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     (4)    The assumptions are—

           (a)           that subsection (2)(b) does not apply, and

           (b)           where applicable, that the earnings constitute taxable earnings in the

tax year in which the employee receives them.

     (5)    Subsection (3) applies only to the extent that the mileage allowance relief

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cannot be deducted under subsection (2).

     (6)    A deduction shall not be made twice, whether under subsection (2) or (3), in

respect of the same mileage allowance relief.

     (7)    In this section “taxable earnings” or “net taxable earnings” means taxable

earnings or net taxable earnings from the employment for the purposes of Part

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2.

 

 

 
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