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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

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Special rules for earnings with a foreign element

 353   Deductions from earnings charged on remittance

     (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—

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           (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

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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.

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     (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

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amounts or expenses out of those earnings.

 354   Disallowance of expenses relating to earnings taxed on different basis or

untaxed

     (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

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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

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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.

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 355   Deductions for corresponding payments by non-domiciled employees with

foreign employers

     (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.

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     (3)    Condition B is that the employment is with a foreign employer.

 

 

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

    181

 

     (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.

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     (6)    If the Board are satisfied that conditions A to D are met, they may allow the

payment as a deduction under this Chapter.

Disallowance of business entertainment and gifts expenses

 356   Disallowance of business entertainment and gifts expenses

     (1)    No deduction from earnings is allowed under this Part for expenses incurred

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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).

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     (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.

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 357   Business entertainment and gifts: exception where employer’s expenses

disallowed

     (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—

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                  (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.

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     (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).

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     (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—

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           (a)           the employer is a tonnage tax company during the whole or part of the

tax year, and

 

 

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

    182

 

           (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.

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 358   Business entertainment and gifts: other exceptions

     (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

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           (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

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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

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           (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.

Other rules preventing deductions of particular kinds

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 359   Disallowance of travel expenses: mileage allowances and reliefs

     (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

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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),

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                    “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).

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Income Tax (Earnings and Pensions) Bill
Part 5 — Employment income: deductions allowed from earnings
Chapter 3 — Deductions from benefits code earnings

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 360   Disallowance of certain accommodation expenses of MPs and other

representatives

     (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—

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           (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

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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.

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Chapter 3

Deductions from benefits code earnings

Introduction

 361   Scope of this Chapter: cost of benefits deductible as if paid by employee

A deduction from a person’s earnings is allowed under the following

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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

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                  (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.

Deductions where amounts treated as earnings under the benefits code

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 362   Deductions where non-cash voucher provided

     (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

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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—

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           (a)           the amount treated as earnings, and

 

 

Income Tax (Earnings and Pensions) Bill
Part 5 — Employment income: deductions allowed from earnings
Chapter 4 — Fixed allowances for employee’s expenses

    184

 

           (b)           the amount that would have been so deductible.

 363   Deductions where credit-token provided

     (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

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           (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—

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           (a)           the amount treated as earnings, and

           (b)           the amount that would have been so deductible.

 364   Deductions where living accommodation provided

     (1)    A deduction from earnings is allowed if—

           (a)           the earnings include an amount treated as earnings under Chapter 5 of

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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.

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 365   Deductions where employment-related benefit provided

     (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

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           (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

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accordance with sections 204 to 206.

Chapter 4

Fixed allowances for employee’s expenses

Introduction

 366   Scope of this Chapter: amounts fixed by Treasury

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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.

 

 

 
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Revised 17 February 2003