House of Lords portcullis
House of Lords
Session 2002 - 03
Internet Publications
Other Bills before Parliament

Income Tax (Earnings and Pensions) Bill


Income Tax (Earnings and Pensions) Bill
Part 4 — Employment income: exemptions
Chapter 10 — Exemptions: termination of employment

    152

 

Chapter 10

Exemptions: termination of employment

Redundancy payments

 309   Limited exemptions for statutory redundancy payments

     (1)    No liability to income tax in respect of earnings arises by virtue of a

5

redundancy payment or an approved contractual payment, except where

subsection (2) applies.

     (2)    Where an approved contractual payment exceeds the amount which would

have been due if a redundancy payment had been payable, the excess is liable

to income tax.

10

     (3)    No liability to income tax in respect of employment income other than earnings

arises by virtue of a redundancy payment or an approved contractual

payment, except where it does so by virtue of Chapter 3 of Part 6 (payments

and benefits on termination of employment etc.).

     (4)    For the purposes of this section—

15

           (a)           a statutory payment in respect of a redundancy payment is to be treated

as paid on account of the redundancy payment, and

           (b)           a statutory payment in respect of an approved contractual payment is

to be treated as paid on account of the approved contractual payment.

     (5)    In this section—

20

                    “approved contractual payment” means a payment to a person on the

termination of the person’s employment under an agreement in respect

of which an order is in force under section 157 of ERA 1996 or Article

192 of ER(NI)O 1996,

                    “redundancy payment” means a redundancy payment under Part 11 of

25

ERA 1996 or Part 12 of ER(NI)O 1996, and

                    “statutory payment” means a payment under section 167(1) of ERA 1996

or Article 202(1) of ER(NI)O 1996.

     (6)    In subsection (5) “employment”, in relation to a person, has the meaning given

in section 230(5) of ERA 1996 or Article 3(5) of ER(NI)O 1996.

30

Outplacement benefits

 310   Counselling and other outplacement services

     (1)    No liability to income tax arises in respect of—

           (a)           the provision of services to a person in connection with the cessation of

the person’s employment, or

35

           (b)           the payment or reimbursement of—

                  (i)                 fees for such provision, or

                  (ii)                travelling expenses incurred in connection with such provision,

            if conditions A to D and, in the case of travel expenses, condition E are met.

     (2)    Condition A is that the only or main purpose of the provision of the services is

40

to enable the person to do either or both of the following—

 

 

Income Tax (Earnings and Pensions) Bill
Part 4 — Employment income: exemptions
Chapter 10 — Exemptions: termination of employment

    153

 

           (a)           to adjust to the cessation of the employment, or

           (b)           to find other gainful employment (including self-employment).

     (3)    Condition B is that the services consist wholly of any or all of the following—

           (a)           giving advice and guidance,

           (b)           imparting or improving skills,

5

           (c)           providing or making available the use of office equipment or similar

facilities.

     (4)    Condition C is that the person has been employed full-time in the employment

which is ceasing throughout the period of 2 years ending—

           (a)           at the time when the services begin to be provided, or

10

           (b)           if earlier, at the time when the employment ceases.

     (5)    Condition D is that the opportunity to receive the services, on similar terms as

to payment or reimbursement of any expenses incurred in connection with

their provision, is available—

           (a)           generally to employees or former employees of the person’s employer

15

in that employment, or

           (b)           to a particular class or classes of them.

     (6)    Condition E is that the travel expenses are expenses—

           (a)           in respect of which, on the assumptions in subsection (7), mileage

allowance relief under Chapter 2 of this Part would be available if no

20

mileage allowance payments had been made, or

           (b)           which, on those assumptions, would be deductible under Part 5.

     (7)    The assumptions are—

           (a)           that receiving the services is one of the duties of the employee’s

employment,

25

           (b)           that the employee incurs and pays the expenses, and

           (c)           if the employment has in fact ceased, that it continues.

     (8)    In this section “mileage allowance payments” has the meaning given by section

229(2).

 311   Retraining courses

30

     (1)    No liability to income tax arises in respect of the payment or reimbursement of

retraining course expenses by a person (“the employer”) if the course

conditions, the employment conditions and, in the case of travel expenses, the

conditions in subsection (5) are met.

     (2)    In subsection (1) “retraining course expenses” means—

35

           (a)           fees for the attendance of another person (“the employee”) at a training

course,

           (b)           travelling expenses incurred in connection with it,

           (c)           fees for an examination taken during or at the end of it, or

           (d)           the cost of any books which are essential for a person attending it.

40

     (3)    The course conditions are that—

           (a)           the course provides training designed to impart or improve skills or

knowledge relevant to, and intended to be used in the course of, gainful

employment (including self-employment) of any description,

 

 

Income Tax (Earnings and Pensions) Bill
Part 4 — Employment income: exemptions
Chapter 10 — Exemptions: termination of employment

    154

 

           (b)           it is entirely devoted to the teaching or practical application (or both) of

the skills or knowledge,

           (c)           it lasts no more than one year, and

           (d)           the employee attends it on a full-time or substantially full-time basis.

     (4)    The employment conditions are that—

5

           (a)           the employee begins the course while employed by the employer or

within the period of one year after the employment ceases,

           (b)           the employee ceases to be employed by the employer before the end of

the period of 2 years beginning at the end of the course and is not re-

employed by the employer within the period of 2 years after so ceasing,

10

           (c)           the employee is employed full-time in the employment which is

ceasing throughout the period of 2 years ending—

                  (i)                 when the employee begins the course, or

                  (ii)                if earlier, when the employment ceases, and

           (d)           the opportunity to undertake the course, on similar terms as to

15

payment or reimbursement of amounts within subsection (1), is

available—

                  (i)                 generally to the employee’s fellow employees or former fellow

employees in that employment, or

                  (ii)                to a particular class or classes of them.

20

     (5)    The travel expenses must be—

           (a)           expenses in respect of which, on the assumptions in subsection (6),

mileage allowance relief under Chapter 2 of this Part would be

available if no mileage allowance payments had been made, or

           (b)           expenses which, on those assumptions, would be deductible under Part

25

5.

     (6)    The assumptions are—

           (a)           that attendance at the course is one of the duties of the employee’s

employment,

           (b)           that the employee incurs and pays the expenses, and

30

           (c)           if the employee has in fact ceased to be employed by the employer, that

the employee continues to be employed by the employer.

     (7)    In this section “mileage allowance payments” has the meaning given by section

229(2).

 312   Recovery of tax

35

     (1)    This section applies if—

           (a)           a person’s liability to tax for a tax year has been determined on the

assumption that section 311(1) applies, and

           (b)           subsequently—

                  (i)                 the condition in section 311(4)(a) is not met because of the

40

person’s failure to begin the course within the period of one

year after ceasing to be employed, or

                  (ii)                the condition in section 311(4)(b) is not met because of the

person’s continued employment or re-employment.

     (2)    An assessment of an amount or further amount of tax due as a result of the

45

condition not being met may be made under section 29(1) of TMA 1970.

 

 

Income Tax (Earnings and Pensions) Bill
Part 4 — Employment income: exemptions
Chapter 11 — Miscellaneous exemptions

    155

 

     (3)    Such an assessment must be made before the end of the period of 6 years

immediately following the end of the tax year in which subsection (1) first

applies.

     (4)    If subsection (1)(b)(i) or (ii) applies, the person’s employer or former employer

must give the Inland Revenue a notice containing particulars of the person’s

5

failure to begin the course or continued employment or re-employment within

60 days of coming to know of it.

     (5)    If the Inland Revenue have reason to believe that a person has failed to give

such a notice, they may by notice require the person to provide such

information as they may reasonably require for the purposes of this section

10

about—

           (a)           the failure to begin the course,

           (b)           the continued employment, or

           (c)           the re-employment.

     (6)    A notice under subsection (5) may specify a time (not less than 60 days) within

15

which the required information must be provided.

Chapter 11

Miscellaneous exemptions

Living accommodation

 313   Repairs and alterations to living accommodation

20

     (1)    This section applies where living accommodation is provided by reason of a

person’s employment.

     (2)    No liability to income tax arises by virtue of Chapter 10 of Part 3 (taxable

benefits: residual liability to charge) in respect of—

           (a)           alterations and additions to the premises which are of a structural

25

nature, or

           (b)           landlord’s repairs to the premises.

     (3)    In this section “landlord’s repairs” means repairs of a kind which are the

obligation of the lessor under the covenants implied by section 11(1) of the

Landlord and Tenant Act 1985 (c. 70) (lessor’s repairing obligations in short

30

leases) where premises are let under a lease to which that section applies.

 314   Council tax etc. paid for certain living accommodation

     (1)    This section applies if living accommodation provided for an employee falls

within the exception in one of the following provisions—

                      section 99(1) (accommodation necessary for proper performance of

35

duties),

                      section 99(2) (accommodation provided for better performance of duties),

or

                      section 100 (accommodation provided as a result of security threat).

     (2)    No liability to income tax arises by virtue of—

40

           (a)           any payment to, for or on behalf of the employee, or

 

 

Income Tax (Earnings and Pensions) Bill
Part 4 — Employment income: exemptions
Chapter 11 — Miscellaneous exemptions

    156

 

           (b)           any reimbursement of any payment by the employee,

            in respect of council tax or rates, or water or sewerage charges, in respect of the

accommodation.

 315   Limited exemption for expenses connected with certain living

accommodation

5

     (1)    This section applies if—

           (a)           living accommodation is provided for an employee in a tax year, and

           (b)           conditions A and B are met.

     (2)    Condition A is that the accommodation falls within the exception in one of the

following provisions—

10

                      section 99(1) (accommodation necessary for proper performance of

duties),

                      section 99(2) (accommodation provided for better performance of duties),

or

                      section 100 (accommodation provided as result of security threat).

15

     (3)    Condition B is that there is an amount of earnings from the employment in the

tax year by virtue of expenditure, or the reimbursement to the employee of

expenditure, on—

           (a)           heating, lighting or cleaning the premises,

           (b)           repairs to the premises, their maintenance or decoration, or

20

           (c)           the provision in the premises of furniture, equipment or other items

which are normal for domestic occupation.

     (4)    If this section applies, no liability to income tax arises in respect of the earnings

mentioned in subsection (3) to the extent that they exceed—equation: plus[id[cross[times[num[10.00000000,"10"],string["%"]],times[char[N],cross[char[

E],over[times[char[D],char[A]],times[char[D],char[E]]]]]]],minus[times[char[S],char[

M],char[G]]]]

            where—

25

                    DA is the number of reckonable days in the tax year (a “reckonable day”

being a day on which—

                  (a)                 the accommodation is provided, and

                  (b)                 the employment is held by the employee),

                    DE is—

30

                  (a)                 the number of days in that year, or

                  (b)                 if the employment is held for only part of that year, the number

of days in that part,

                    NE is the net amount of the earnings from the employment in the tax year

(see subsection (5)),

35

                    SMG is, where the expenses are incurred by a person other than the

employee, so much of any sum made good by the employee to that

other person as is properly attributable to the expenses.

     (5)    To calculate the net amount of the earnings from the employment—

Step 1

40

            Take the earnings from the employment, leaving out of account the expenses

in question.

 

 

Income Tax (Earnings and Pensions) Bill
Part 4 — Employment income: exemptions
Chapter 11 — Miscellaneous exemptions

    157

 

Step 2

            Add, in the case of employment by a company, the earnings from any

employment by an associated company.

            A company is “associated” with another for this purpose if one has control of

the other or both are under the control of the same person.

5

Step 3

            Deduct any deductions allowable under—

           (a)           section 232 (giving effect to mileage allowance relief) or Part 5 of this

Act,

           (b)           section 262 of CAA 2001 (capital allowances to be given effect by

10

treating them as deductions from earnings), or

           (c)           section 592(7), 594 or 619(1)(a) of ICTA.

Work accommodation, supplies etc.

 316   Accommodation, supplies and services used in employment duties

     (1)    No liability to income tax arises by virtue of Chapter 10 of Part 3 (taxable

15

benefits: residual liability to charge) in respect of the provision for an employee

of accommodation, supplies or services used by the employee in performing

duties of the employment if conditions A and B are met.

     (2)    Condition A is that any use of the accommodation, supplies or services for

private purposes by the employee or members of the employee’s family or

20

household is not significant.

     (3)    For this purpose, use “for private purposes” means—

           (a)           use that is not use in performing the duties of the employee’s

employment, and

           (b)           use that is at the same time both use in performing the duties of an

25

employee’s employment and other use.

     (4)    Condition B is that where the provision is otherwise than on premises occupied

by the person making it—

           (a)           its sole purpose is to enable the employee to perform the duties of the

employee’s employment, and

30

           (b)           what is provided is not an excluded benefit.

     (5)    The following are excluded benefits unless regulations under subsection (6)

provide otherwise—

           (a)           a motor vehicle, boat or aircraft, and

           (b)           a benefit that involves—

35

                  (i)                 the extension, conversion or alteration of living

accommodation, or

                  (ii)                the construction, extension, conversion or alteration of a

building or other structure on land adjacent to and enjoyed with

such accommodation.

40

     (6)    The Treasury may make provision by regulations as to what is an excluded

benefit for the purposes of subsection (4)(b).

 

 

Income Tax (Earnings and Pensions) Bill
Part 4 — Employment income: exemptions
Chapter 11 — Miscellaneous exemptions

    158

 

     (7)    The regulations may provide that a benefit is an excluded benefit only if such

conditions as may be prescribed are met as to the terms on which, and persons

to whom, it is provided.

Workplace meals

 317   Subsidised meals

5

     (1)    No liability to income tax arises in respect of the provision for an employee by

the employer of free or subsidised meals if—

           (a)           they are provided in a canteen where meals are provided for the

employer’s employees generally or generally to those at a particular

location, or

10

           (b)           they are provided on the employer’s business premises and conditions

A to C are met.

     (2)    Condition A is that the meals are provided on a reasonable scale.

     (3)    Condition B is that all the employer’s employees or all of them at a particular

location may obtain one or both of the following—

15

           (a)           a free or subsidised meal, or

           (b)           a free or subsidised meal voucher or token.

     (4)    Condition C is that if the meals are provided in the restaurant or dining room

of a hotel or a catering or similar business at a time when meals are being

served to the public—

20

           (a)           part of the restaurant or dining room is designated for the use of

employees only, and

           (b)           the meals are taken in that part.

     (5)    In this section “free or subsidised meal voucher or token” means a voucher,

ticket, pass or other document or token which—

25

           (a)           is intended to enable a person to obtain a meal, and

           (b)           is provided to the employee free of charge or for less than the cost of the

meals to be obtained by it.

     (6)    In this section “meals” includes light refreshments.

Childcare

30

 318   Care for children

     (1)    No liability to income tax arises by virtue of Chapter 10 of Part 3 (taxable

benefits: residual liability to charge) in respect of the provision for an employee

of care for a child if conditions A to C are met.

     (2)    If those conditions are met only as respects part of the provision, no such

35

liability arises in respect of that part.

     (3)    Condition A is that the child is under 18 and—

           (a)           is a child of the employee maintained at the employee’s expense,

           (b)           is resident with the employee, or

 

 

 
previous section contents continue
 
House of Lords home page Houses of Parliament home page House of Commons home page search page enquiries

© Parliamentary copyright 2003
Revised 17 February 2003