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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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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

in providing entertainment or a gift in connection with the employer’s trade,

business, profession or vocation.

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     (2)    Subsection (1) is subject to the exceptions in—

           (a)           section 357 (exception where employer’s expenses disallowed), and

           (b)           section 358 (other exceptions).

     (3)    For the purposes of this section and those sections—

           (a)           “entertainment” includes hospitality of any kind, and

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           (b)           expenses incurred in providing entertainment or a gift include

expenses incurred in providing anything incidental to the provision of

entertainment or a gift.

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

disallowed

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     (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—

                  (i)                 paid the amount to, or on behalf of, the employee, or

                  (ii)                put it at the employee’s disposal,

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                         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.

     (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,

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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).

     (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

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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—

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

tax year, and

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

    182

 

 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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 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

 

 

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

    183

 

           (d)           the Northern Ireland Assembly.

     (2)    In this section “accommodation expenses” means expenses incurred in, or in

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—

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           (a)           the place where it sits, or

           (b)           the constituency or region which the member represents.

Chapter 3

Deductions from benefits code earnings

Introduction

10

 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

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-

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tokens),

                  (ii)                Chapter 5 of Part 3 (taxable benefits: living accommodation), or

                  (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

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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

 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)

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(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

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

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deductible from the earnings under Chapter 2 or 5 of this Part.

     (2)    The deduction is equal to the lesser of—

           (a)           the amount treated as earnings, and

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

 363   Deductions where credit-token provided

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     (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

 

 

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

    184

 

           (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.

Fixed sum deductions

 367   Fixed sum deductions for repairing and maintaining work equipment

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     (1)    A deduction is allowed for the sum, if any, fixed by the Treasury as in their

opinion representing the average annual expenses incurred by employees of

 

 

Income Tax (Earnings and Pensions) Bill
Part 5 — Employment income: deductions allowed from earnings
Chapter 5 — Deductions for earnings representing benefits or reimbursed expenses

    185

 

     (1)    the class to which the employee belongs in respect of the repair and

maintenance of work equipment.

     (2)    The Treasury may only fix such a sum for a class of employees if they are

satisfied that—

           (a)           the employees are generally responsible for the whole or part of the

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expense of repairing and maintaining the work equipment, and

           (b)           the expenses for which they are generally responsible would be

deductible from the employees’ earnings under section 336 if paid by

them.

     (3)    No deduction is allowed under this section if the employer pays or reimburses

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the expenses in respect of which the sum is fixed or would do so if requested.

     (4)    If the employer pays or reimburses part of those expenses or would do so if

requested, the amount of the deduction is reduced by the amount which is or

would be paid or reimbursed.

     (5)    In this section “work equipment” means tools or special clothing.

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     (6)    This section needs to be read with section 330(2) (prevention of double

deductions).

 368   Fixed sum deductions from earnings payable out of public revenue

     (1)    A deduction is allowed from earnings payable out of the public revenue for the

employee’s fixed sum expenses in respect of the duties to which the earnings

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relate.

     (2)    “Fixed sum expenses” means the sum, if any, fixed by the Treasury as in their

opinion representing the average annual expenses which employees of the

employee’s description are obliged to pay wholly, exclusively and necessarily

in the performance of duties to which such earnings relate.

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     (3)    This section needs to be read with section 330(2) (prevention of double

deductions).

Chapter 5

Deductions for earnings representing benefits or reimbursed expenses

Introduction

30

 369   Scope of this Chapter: earnings representing benefits or reimbursed expenses

     (1)    A deduction from a person’s earnings for an amount is allowed under the

following provisions of this Chapter where the amount is included in the

earnings in respect of—

           (a)           provision made for the person, or

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           (b)           expenses reimbursed by another person.

     (2)    In this Chapter references to “the included amount” are references to the

amount so included.

     (3)    If the included amount is an amount treated as earnings under—

           (a)           Chapter 4 of Part 3 (taxable benefits: vouchers and credit-tokens),

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Income Tax (Earnings and Pensions) Bill
Part 5 — Employment income: deductions allowed from earnings
Chapter 5 — Deductions for earnings representing benefits or reimbursed expenses

    186

 

           (b)           Chapter 5 of Part 3 (taxable benefits: living accommodation), or

           (c)           Chapter 10 of Part 3 (taxable benefits: residual liability to charge),

            a deduction may be allowed instead in respect of the benefit in question under

Chapter 3 of this Part (deductions from benefits code earnings).

Travel costs and expenses where duties performed abroad

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 370   Travel costs and expenses where duties performed abroad: employee’s travel

     (1)    A deduction is allowed from earnings which are taxable earnings under

section 15 or 21 (earnings for year when employee resident and ordinarily

resident in UK) if—

           (a)            the earnings include an amount in respect of—

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                  (i)                 the provision of travel facilities for a journey made by the

employee, or

                  (ii)                the reimbursement of expenses incurred by the employee on

such a journey, and

           (b)           the circumstances fall within Case A, B or C.

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     (2)    The deduction is equal to the included amount.

     (3)    Case A is where—

           (a)           the employee is absent from the United Kingdom wholly and

exclusively for the purpose of performing the duties of one or more

employments,

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           (b)           the duties concerned can only be performed outside the United

Kingdom, and

           (c)           the journey is—

                  (i)                 a journey from a place outside the United Kingdom where such

duties are performed to a place in the United Kingdom, or

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                  (ii)                a return journey following such a journey.

     (4)    Case B is where—

           (a)           the duties of the employment are performed partly outside the United

Kingdom,

           (b)           those duties are not performed on a vessel,

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           (c)           the journey is between a place in the United Kingdom and a place

outside the United Kingdom where duties of the employment are

performed,

           (d)           the duties performed outside the United Kingdom can only be

performed there, and

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           (e)           the journey is made wholly and exclusively for the purpose of

performing them or returning after performing them.

     (5)    Case C is where—

           (a)           the duties of the employment are performed partly outside the United

Kingdom,

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           (b)           those duties are performed on a vessel,

           (c)           the journey is between a place in the United Kingdom and a place

outside the United Kingdom where duties of the employment are

performed,

 

 

Income Tax (Earnings and Pensions) Bill
Part 5 — Employment income: deductions allowed from earnings
Chapter 5 — Deductions for earnings representing benefits or reimbursed expenses

    187

 

           (d)           the duties performed outside the United Kingdom can only be

performed there, and

           (e)           the journey is made wholly and exclusively for the purpose of

performing those duties, or those duties and other duties of the

employment, or returning after performing them.

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 371   Travel costs and expenses where duties performed abroad: visiting spouse’s

or child’s travel

     (1)    A deduction is allowed from earnings which are taxable earnings under

section 15 or 21 (earnings for year when employee resident and ordinarily

resident in UK) if—

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           (a)           the earnings include an amount in respect of—

                  (i)                 the provision of travel facilities for a journey made by the

employee’s spouse or child, or

                  (ii)                the reimbursement of expenses incurred by the employee on

such a journey, and

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           (b)           conditions A to C are met.

     (2)    The deduction is equal to the included amount.

     (3)    Condition A is that the employee is absent from the United Kingdom for a

continuous period of at least 60 days for the purpose of performing the duties

of one or more employments.

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     (4)    Condition B is that the journey is between a place in the United Kingdom and

a place outside the United Kingdom where such duties are performed.

     (5)    Condition C is that the employee’s spouse or child is—

           (a)           accompanying the employee at the beginning of the period of absence,

           (b)           visiting the employee during that period, or

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           (c)           returning to a place in the United Kingdom after so accompanying or

visiting the employee.

     (6)    A deduction is not allowed under this section for more than two outward and

two return journeys by the same person in a tax year.

     (7)    In this section “child” includes a stepchild and an illegitimate child, but not a

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person who is 18 or over at the beginning of the outward journey.

 372   Where seafarers’ duties are performed

For the purposes of—

           (a)           section 370 (employee’s travel costs and expenses where duties

performed abroad), and

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           (b)           section 371 (visiting spouse’s or child’s travel costs and expenses where

duties performed abroad),

            whether duties performed on a vessel are performed in or outside the United

Kingdom is determined without regard to section 40(2) (certain duties treated

as performed in UK).

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