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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

 

            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

against a payment falling within paragraph A, or

                  (b)                    provision in the contract for the payment of any costs or

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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

insurance in respect of the liability, or costs or expenses, in question.

     (3)    In this Chapter—

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           (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,

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

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reasonable basis.

 347   Payments made after leaving the employment

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

           (a)           the employee has ceased to hold the employment, and

           (b)           the payment is made after the day on which the employee ceased to

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hold the employment.

     (2)    If subsection (1) applies, see section 555 (former employee entitled to

deduction from total income).

 348   Liabilities related to the employment

For the purposes of this Chapter each of the following kinds of liability is

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related to the employment—

            

            A. Liability imposed upon the employee because he did an act, or failed to do

an act—

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

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

the duties of the employment.

            

            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

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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

the duties of the employment.

 349   Meaning of “qualifying insurance contract”

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     (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—

 

 

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

    177

 

           (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—

           (a)           it had not been entered into in anticipation of the other being entered

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into, or

           (b)           the other had not also been entered into.

     (4)    If—

           (a)           there is only one such significant difference in terms, and

           (b)           the contracts meet conditions A, B and C specified in section 349,

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

    178

 

            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

           (b)           being entered into by way of renewal.

5

     (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

attributable only to the premium under each of them having been fixed

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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.

Expenses of ministers of religion

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 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

employment.

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     (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—

           (a)           one quarter of the rent, or

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           (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

corporation, and

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           (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

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

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maintenance, repair, insurance or management of the premises.

     (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

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                    B is the amount of those expenses that are allowed under subsection (1).

 

 

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

    179

 

     (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).

Special rules for earnings with a foreign element

 353   Deductions from earnings charged on remittance

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     (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—

           (a)           any expenses—

                  (i)                 paid by the employee out of the earnings, or

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

    180

 

                  (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

earlier tax year in which the employee has been resident in the United

Kingdom.

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     (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.

     (4)    Where—

           (a)           any of the deductibility provisions refers to amounts or expenses that

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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

amounts or expenses out of those earnings.

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

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untaxed

     (1)    If the earnings from an employment for a tax year include both earnings

charged on receipt and other earnings, 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.

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     (2)    If the earnings from an employment for a tax year include both earnings

charged on remittance and other earnings, no deduction is 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

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provisions.

 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.

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     (2)    Condition A is that the employee is not domiciled in the United Kingdom.

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

     (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

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United Kingdom income tax, but was made in circumstances corresponding to

those in which it would do so.

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

payment as a deduction under this Chapter.

 

 

 
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