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Income Tax (Earnings and Pensions) Bill


Income Tax (Earnings and Pensions) Bill
Part 5 — Employment income: deductions allowed from earnings
Chapter 2 — Deductions for employee’s expenses

    176

 

            

            B. Payment of any costs or expenses incurred in connection with—

                  (a)                    a claim that the employee is subject to a liability related to the

employment, or

                  (b)                    proceedings relating to or arising out of a claim that the

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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—

                  (a)                    provision in the contract for the employee to be indemnified

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against a payment falling within paragraph A, or

                  (b)                    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

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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,

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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.

 347   Payments made after leaving the employment

     (1)    A deduction for a payment is not allowed under section 346 if—

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           (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).

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 348   Liabilities related to the employment

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

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an act—

                  (a)                    in his capacity as holder of the employment, or

                  (b)                    in any other capacity in which he acted in the performance of

the duties of the employment.

            

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            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—

                  (a)                    in his capacity as holder of the employment, or

                  (b)                    in any other capacity in which he acted in the performance of

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the duties of the employment.

 

 

Income Tax (Earnings and Pensions) Bill
Part 5 — Employment income: deductions allowed from earnings
Chapter 2 — Deductions for employee’s expenses

    177

 

 349   Meaning of “qualifying insurance contract”

     (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—

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           (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—

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                  (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,

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           (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—

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           (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—

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           (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

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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.

 350   Connected contracts

     (1)    An insurance contract is connected with another contract for the purposes of

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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

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           (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—

 

 

Income Tax (Earnings and Pensions) Bill
Part 5 — Employment income: deductions allowed from earnings
Chapter 2 — Deductions for employee’s expenses

    178

 

           (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

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           (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

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           (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

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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.

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Expenses of ministers of religion

 351   Expenses of ministers of religion

     (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

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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—

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           (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

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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

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employment for part of any expenses borne by the minister on the

maintenance, repair, insurance or management of the premises.

 

 

Income Tax (Earnings and Pensions) Bill
Part 5 — Employment income: deductions allowed from earnings
Chapter 2 — Deductions for employee’s expenses

    179

 

     (4)    The amount of the deduction is—equation: plus[over[char[A],num[4.00000000,"4"]],minus[char[B]]]

            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).

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     (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).

Agency fees paid by entertainers

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 352   Limited deduction for agency fees paid by entertainers

     (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).

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     (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.

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     (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

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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

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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

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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).

 

 

 
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Revised 17 February 2003