Expenses incidental to sale etc. of asset
326 Expenses incidental to transfer of a kind not normally met by transferor
(1) No liability to income tax arises by virtue of the payment or reimbursement of
(a) are incidental to, and incurred wholly and exclusively as a result of, an
employment-related asset transfer, and
(b) are of a kind not normally met by the transferor.
(2) There is an “employment-related asset transfer” if—
(a) an asset or the beneficial interest in an asset is transferred to an
employee’s employer or a person nominated by the employer, and
(b) the right or opportunity to make the transfer arose by reason of the
(3) In this section references to a transfer are to a sale or any other kind of disposal.
Employment income: deductions allowed from earnings
Deductions allowed from earnings: general rules
327 Deductions from earnings: general
(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
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),
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
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).
328 The income from which deductions may be made
(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
(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,
(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),
Chapter 6 of this Part (deductions from seafarers’ earnings: see section
329 Deductions from earnings not to exceed earnings
(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
(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
(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).
330 Prevention of double deductions
(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.
331 Order for making deductions
(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
(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
332 Meaning of “the deductibility provisions”
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
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
section 363(1)(b) and (2)(b) (deductions where credit-token provided),
section 364(1)(b) and (2) (deductions where living accommodation
section 365(1)(b) and (2) (deductions where employment-related benefit
Deductions for employee’s expenses
333 Scope of this Chapter: expenses paid by the employee
(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
(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.
334 Effect of reimbursement etc.
(1) For the purposes of this Chapter, a person may be regarded as paying an
(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
335 Application of deductions provisions: “earnings charged on receipt” and
“earnings charged on remittance”
(1) The availability of certain deductions under this Chapter depends on whether
the earnings are earnings charged on receipt or earnings charged on
(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.
General rule for deduction of employee’s expenses
336 Deductions for expenses: the general rule
(1) The general rule is that a deduction from earnings is allowed for an amount
(a) the employee is obliged to incur and pay it as holder of the
(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).