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Income Tax (Earnings and Pensions) Act 2003 (c. 1)(The document as of February, 2008) Page 20 Pages: P.1 | P.2 | P.3 | P.4 | P.5 | P.6 | P.7 | P.8 | P.9 | P.10 | P.11 | P.12 | P.13 | P.14 | P.15 | P.16 | P.17 | P.18 | P.19 | P.20 | P.21 | P.22 | P.23 | P.24 | P.25 | P.26 | P.27 | P.28 | P.29 | P.30 | P.31 | P.32 | P.33 | P.34 | P.35 | P.36 | P.37 | P.38 | P.39 | P.40 | P.41 | P.42 | P.43 | P.44 | P.45 | P.46 | P.47 | P.48 | P.49 | P.50 | P.51 | P.52 (5) Duties of the employment performed in the United Kingdom, whose performance is merely incidental to the performance of duties outside the United Kingdom, are to be treated for the purposes of subsection (1)(a) as performed outside the United Kingdom. Personal security assets and services377 Costs and expenses in respect of personal security assets and services(1) This section applies if-- (a) there is a special threat to an employee's personal physical security which arises wholly or mainly because of the employee's employment, (b) an asset or service which improves personal security is provided for or used by the employee to meet the threat, (c) the employee's earnings include an amount in respect of-- (i) the provision or use, or (ii) expenses connected with it, because the whole or part of the cost of the provision or use is borne, or the expenses are reimbursed to the employee, by or on behalf of another person ("the provider"), and (d) the provider's sole object in bearing the whole or part of the cost or reimbursing the expenses is meeting the threat. (2) In the case of such an asset, if the provider intends it to be used solely for the purpose of improving personal physical security, a deduction equal to the included amount is allowed. (3) If the provider intends the asset to be used solely to improve personal physical security, any use of the asset incidental to that purpose is ignored. (4) If the provider intends the asset to be used only partly to improve personal physical security, a deduction equal to the proportion of the included amount attributable to the intended use for that purpose is allowed. (5) In determining whether or not this section applies in relation to an asset, it does not matter if-- (a) the asset becomes fixed to land (even a dwelling or grounds), or (b) the employee is or becomes entitled-- (i) to the property in the asset, or (ii) if the asset is a fixture, to any estate or interest in the land concerned. (6) In the case of a service within subsection (1), if the benefit resulting to the employee consists wholly or mainly of an improvement of the employee's personal physical security, a deduction equal to the included amount is allowed. (7) The fact that an asset or a service improves the personal physical security of a member of the employee's family or household, as well as that of the employee, does not prevent a deduction being allowed. (8) In this section--
Chapter 6 Deductions from seafarers' earnings378 Deduction from seafarers' earnings: eligibility(1) A deduction is allowed from earnings from an employment as a seafarer if-- (a) the earnings are taxable earnings under section 15 or 21 (earnings for year when employee resident and ordinarily resident in UK), (b) the duties of the employment are performed wholly or partly outside the United Kingdom, and (c) any of those duties are performed in the course of an eligible period. (2) In this Chapter "eligible period" means a period consisting of at least 365 days which is either-- (a) a period of consecutive days of absence from the United Kingdom, or (b) a combined period. (3) A combined period is a period-- (a) at least half of the days in which are days of absence from the United Kingdom, and (b) which consists of 3 consecutive periods, A, B and C, where--
(4) For this purpose a person is only regarded as being absent from the United Kingdom on any day if absent at the end of the day. 379 Calculating the deduction(1) The deduction under section 378-- (a) is allowed from the amount of the earnings from the employment attributable to the eligible period, and (b) is equal to that amount. (2) Earnings from the employment for a period of leave immediately after the eligible period are to be regarded as earnings attributable to the eligible period if or to the extent that they are earnings for the tax year in which the eligible period ends. (3) This section is subject to section 380 (limit on deduction where UK duties etc. make amount unreasonable). 380 Limit on deduction where UK duties etc. make amount unreasonable(1) If-- (a) section 378 (deduction from seafarers' earnings: eligibility) applies to earnings for a tax year, and (b) in the tax year the employee performs some of the duties of the employment as a seafarer or of any associated employments in the United Kingdom, the amount of earnings in respect of which the deduction under this Chapter is allowed is subject to the following limitation. (2) The amount is restricted to the proportion of the aggregate earnings for that year from the employment as a seafarer and all associated employments that is reasonable having regard to-- (a) the nature of and time devoted to the duties performed outside and in the United Kingdom, and (b) all other relevant circumstances. (3) In this section "associated employments" means employments with the same employer or with associated employers. (4) The same rules for determining whether employers are associated apply for the purposes of this section as apply for section 24(4) (limit on chargeable overseas earnings where duties of associated employment performed in UK) (see section 24(5)). 381 Taking account of other deductionsFor the purposes of sections 379 and 380, the amount of the earnings from an employment for a tax year is the amount remaining after any deductions under-- (a) section 232 (giving effect to mileage allowance relief), (b) Chapter 2, 3, 4 or 5 of this Part, (c) section 592(7) of ICTA (contributions to exempt approved schemes), (d) section 594(1) of ICTA (contributions to exempt statutory schemes), and (e) section 262 of CAA 2001 (capital allowances to be given effect by treating them as deductions from earnings). 382 Duties on board ship(1) Duties which a person performs on a ship engaged-- (a) on a voyage beginning or ending outside the United Kingdom (but excluding any part of it beginning and ending in the United Kingdom), or (b) on a part beginning or ending outside the United Kingdom of any other voyage, are treated as performed outside the United Kingdom for the purposes of this Chapter. (2) Duties which a person performs on a vessel engaged on a voyage not extending to a port outside the United Kingdom are treated for the purposes of this Chapter as performed in the United Kingdom. (3) For the purposes of subsection (1) the areas designated under section 1(7) of the Continental Shelf Act 1964 (c. 29) are treated as part of the United Kingdom. (4) Subsection (1) applies despite anything to the contrary in section 40 (duties on board vessel or aircraft). 383 Place of performance of incidental duties(1) For the purposes of section 378(1)(b) (deduction from seafarers' earnings: eligibility), duties of an employment as a seafarer which are performed outside the United Kingdom are treated as performed in the United Kingdom if conditions A and B are met. (2) Condition A is that in the tax year in which the duties are performed the employment is in substance one whose duties fall to be performed in the United Kingdom. (3) Condition B is that the performance of the duties performed outside the United Kingdom is merely incidental to the performance of duties in the United Kingdom. (4) Section 39 (duties in UK merely incidental to duties outside UK) does not affect the question-- (a) where any duties are performed, or (b) whether a person is absent from the United Kingdom, for the purposes of section 378(1) to (3). 384 Meaning of employment "as a seafarer"(1) In this Chapter employment "as a seafarer" means an employment (other than Crown employment) consisting of the performance of duties on a ship or of such duties and others incidental to them. (2) In this section "Crown employment" means employment under the Crown-- (a) which is of a public nature, and (b) the earnings from which are payable out of the public revenue of the United Kingdom or of Northern Ireland. 385 Meaning of "ship"In this Chapter "ship" does not include-- (a) any offshore installation within the meaning of the Mineral Workings (Offshore Installations) Act 1971 (c. 61), or (b) what would be such an installation if the references in that Act to controlled waters were to any waters. Part 6 Employment income: income which is not earnings or share-relatedChapter 1 Payments to non-approved pension schemes386 Charge on payments to non-approved retirement benefits schemes(1) A sum paid by an employer-- (a) in accordance with a non-approved retirement benefits scheme, and (b) with a view to the provision of relevant benefits for or in respect of an employee of the employer, counts as employment income of the employee for the relevant tax year. (2) The "relevant tax year" is the tax year in which the sum is paid. (3) Subsection (1) does not apply if or to the extent that the sum is chargeable to income tax as the employee's income apart from this section. (4) But if, apart from this section, the payment of the sum would be a payment to which Chapter 3 of this Part (payments and benefits on termination of employment etc.) would apply, subsection (1) applies to the sum (and accordingly that Chapter does not apply to it). (5) In this Chapter-- (a) "employee" includes a person who is to be or has been an employee, (b) section 5(1) (application to offices) does not apply, but "employee", in relation to a company, includes any officer or director of the company and any other person taking part in the management of the affairs of the company, (c) "employer" and "employment" have meanings corresponding to the meaning of "employee" given by paragraphs (a) and (b), (d) "director" has the meaning given by section 612(1) of ICTA, and (e) "relevant benefits" has the meaning given by that section, and section 612(2) of ICTA applies to references in this Chapter to the provision of relevant benefits as it applies to such references in Chapter 1 of Part 14 of ICTA. (6) For the purposes of this Chapter benefits are provided in respect of an employee if they are provided for the employee's spouse, widow or widower, children, dependants or personal representatives. (7) Any liability to tax arising by virtue of this section is subject to the reliefs given under-- (a) section 392 (relief where no benefits are paid or payable), and (b) section 266A of ICTA (life assurance premiums paid by employer). 387 Meaning of "non-approved retirement benefits scheme"(1) In this Chapter "retirement benefits scheme" has the meaning given by section 611 of ICTA. (2) For the purposes of this Chapter, a retirement benefits scheme is "non-approved" unless it is-- (a) an approved scheme, (b) a relevant statutory scheme, or (c) a scheme set up by a government outside the United Kingdom for the benefit of its employees or primarily for their benefit. (3) In this section--
388 Apportionment of payments in respect of more than one employee(1) If a sum within section 386 is paid for or in respect of two or more employees, part of it is treated as paid in respect of each of them. (2) The amount treated as paid in respect of each employee is-- ---where--
389 Exception: employments where earnings charged on remittance(1) Section 386 does not apply if in the tax year in which the sum is paid the earnings from the employment are earnings charged on remittance (or would be if there were any earnings). (2) In subsection (1) "earnings charged on remittance" means earnings which are taxable earnings under-- (a) section 22 (chargeable overseas earnings for year when employee resident and ordinarily resident, but not domiciled, in UK), or (b) section 26 (foreign earnings for year when employee resident, but not ordinarily resident, in UK). 390 Exception: non-domiciled employees with foreign employersSection 386 does not apply if-- (a) the employee is not domiciled in the United Kingdom in the tax year in which the sum is paid, (b) the employment is with a foreign employer, and (c) on a claim made by the employee the Board of Inland Revenue are satisfied that the scheme corresponds to a scheme within section 387(2)(a), (b) or (c). 391 Exception: seafarers with overseas earningsSection 386 does not apply if-- (a) the sum is paid in a period that is an eligible period in relation to the employee's employment for the purposes of Chapter 6 of Part 5 (deductions from seafarers' earnings) (see section 378(2)), and (b) a deduction is allowed under section 378 from the employee's earnings that are attributable to that period. 392 Relief where no benefits are paid or payable(1) An application for relief may be made to the Inland Revenue if-- (a) a sum is charged to tax by virtue of section 386 in respect of the provision of any benefits, (b) no payment in respect of, or in substitution for, the benefits has been made, and (c) an event occurs by reason of which no such payment will be made. (2) The application must be made within 6 years from the time when the event occurs. (3) The application must be made by the employee or, if the employee has died, the employee's personal representatives. (4) If the Inland Revenue are satisfied that the conditions in subsection (1) are met in relation to the whole sum, they must give relief in respect of tax on it by repayment or otherwise as appropriate, unless subsection (6) applies. (5) If the Inland Revenue are satisfied that the conditions in subsection (1) are met in relation to part of the sum, they may give such relief in respect of tax on it as is just and reasonable, unless subsection (6) applies. (6) This subsection applies if-- (a) the reason why no payment has been made in respect of, or in substitution for, the benefits, or (b) the event by reason of which there will be no such payment, is a reduction or cancellation of the employee's rights in respect of the benefits, or part of the benefits, as a consequence of a pension sharing order or provision. (7) In subsection (6) "pension sharing order or provision" means any such order or provision as is mentioned in-- (a) section 28(1) of WRPA 1999 (rights under pension sharing arrangements), or (b) Article 25(1) of WRP(NI)O 1999 (provision for Northern Ireland corresponding to section 28(1) of WRPA 1999). Chapter 2 Benefits from non-approved pension schemesBenefits treated as employment income393 Application of this Chapter(1) This Chapter applies to any benefit provided under a non-approved retirement benefits scheme. (2) But this Chapter does not apply to a benefit which is charged to tax under Part 9 (pension income). 394 Charge on benefit to which this Chapter applies(1) If a benefit to which this Chapter applies is received by an individual, the amount of the benefit counts as employment income of the individual for the relevant tax year. (2) If a benefit to which this Chapter applies is received by a person who is not an individual, the administrator of the scheme under which the benefit is provided is chargeable to tax under Case VI of Schedule D on the amount of the benefit for the relevant tax year. (3) In subsections (1) and (2) the "relevant tax year" is the tax year in which the benefit is received. (4) For the purposes of subsection (2), the rate of tax is 40% or such other rate as may for the time being be specified by the Treasury by order. (5) No liability to income tax arises by virtue of any other provision of this Act in respect of a benefit to which this Chapter applies. 395 Application of sections 396 and 397: general rules(1) Section 394 is subject to-- (a) section 396 (which provides that certain lump sums are not taxed by virtue of section 394), and (b) section 397 (which provides for the calculation of the amount taxed by virtue of section 394 in relation to certain lump sums). (2) Section 396 applies in relation to a lump sum only if the condition in subsection (4) below is met. (3) Section 397 applies in relation to a lump sum only if-- (a) the condition in subsection (4) below is met, or (b) an employee has paid any sum or sums with a view to the provision of any relevant benefits under the scheme under which the lump sum is provided. (4) The condition mentioned in subsections (2) and (3)(a) is that-- (a) an employer has paid any sum or sums with a view to the provision of any relevant benefits under the scheme under which the lump sum is provided, and (b) an employee has been assessed to tax in respect of the sum or sums so paid-- (i) by virtue of section 595(1) of ICTA, or (ii) by virtue of the sum or sums counting as employment income of the employee under section 386(1) of this Act. (5) For the purposes of this section it must be assumed that, unless the contrary is shown-- (a) no sums have been paid with a view to the provision of relevant benefits, and (b) an employee has not been assessed in respect of a sum or sums as mentioned in subsection (4)(b). 396 Certain lump sums not taxed by virtue of section 394(1) Section 394 does not apply to a lump sum if-- (a) all of the income and gains accruing to the scheme under which the lump sum is provided are brought into charge to tax, and (b) the lump sum is provided to-- (i) the employee mentioned in section 395(4)(b), (ii) a relative of that employee, (iii) the personal representatives of that employee, (iv) an ex-spouse of that employee, or (v) any other individual designated by that employee. (2) For the purposes of this section it must be assumed that, unless the contrary is shown, the income and gains accruing to the scheme are not brought into charge to tax. 397 Certain lump sums: calculation of amount taxed by virtue of section 394(1) In a case where-- (a) section 394 applies to a lump sum, and (b) any of the income or gains accruing to the scheme under which the lump sum is provided is not brought into charge to tax, the amount which by virtue of that section counts as employment income, or is chargeable to tax under Case VI of Schedule D, is determined in accordance with this section. (2) That amount is the amount of the lump sum reduced by the deduction applicable under subsection (3) or (4). (3) Subject to subsection (4), the deduction applicable is the aggregate of-- (a) the sum or sums mentioned in section 395(3)(b) (if any), and (b) the sum or sums mentioned in section 395(4)(b) (if any), which in either case were paid by way of contribution to the provision of the lump sum. (4) The deduction applicable is calculated in accordance with the formula in subsection (6) if-- (a) the lump sum is provided under the scheme on the disposal of a part of any asset or the surrender of any part of or share in any rights in any asset, and (b) a person falling within subsection (5) has a right to receive, or any expectation of receiving, a further lump sum or further lump sums under the scheme on a further disposal of any part of the asset or a further surrender of any part of or share in any rights in the asset. (5) The persons referred to in subsection (4)(b) are-- (a) the employee, (b) a relative of that employee, (c) the personal representatives of that employee, or (d) any person connected with that employee. (6) The formula referred to in subsection (4) is-- ---where--
(7) An individual may not claim that a deduction is applicable in relation to a lump sum more than once. (8) For the purposes of this section it must be assumed that, unless the contrary is shown-- (a) the income and gains accruing to the scheme are not brought into charge to tax, and (b) no deduction is applicable under subsection (3) or (4). (9) For the purposes of this section income and gains accruing to the scheme are not to be regarded as brought into charge to tax merely because tax is charged in relation to the scheme in accordance with section 591C of ICTA. (10) In this section "market value" is to be construed in accordance with sections 272 and 273 of TCGA 1992. Valuation of benefits etc.398 Valuation of benefits(1) In the case of a cash benefit, for the purposes of this Chapter the amount of a benefit is taken to be the amount received. (2) In the case of a non-cash benefit, for the purposes of this Chapter the amount of a benefit is taken to be the greater of-- (a) the amount of earnings (as defined in Chapter 1 of Part 3) that the benefit would give rise to if it were received for performance of the duties of an employment (money's worth), and (b) the cash equivalent of the benefit under the benefits code if it were so received and the code applied to it. (3) For the purposes of subsection (2) the benefits code has effect with the modifications in subsections (4) to (6). (4) References in the benefits code to the employee are to be taken as references to the person by whom the benefit is received. (5) References in the benefits code to the employer are to be taken as including references to the former employer. (6) Where-- (a) section 106 (cash equivalent: cost of accommodation over £75,000) applies, and (b) the amount referred to in section 105(2)(b) (the sum made good) exceeds the amount referred to in section 105(2)(a) (the rental value), the amount to be subtracted under paragraph (b) of step 4 of the calculation in section 106(2) is that excess (and not only the excess rent referred to there). 399 Employment-related loans: interest treated as paid(1) This section applies if-- (a) an amount consisting of, or including, an amount representing the benefit of a loan ("a taxable amount") counts as employment income of an individual in a tax year under section 394(1), or (b) the administrator of a scheme is charged to tax on a taxable amount under Case VI of Schedule D under section 394(2). (2) The individual or the administrator is to be treated for all purposes of the Tax Acts (other than this Chapter) as having paid interest on the loan in the tax year equal to the amount representing the cash equivalent of the loan. (3) The interest is to be treated-- (a) as accruing during the period in the tax year during which the loan is outstanding, and (b) as paid at the end of the period. (4) The interest is not to be treated-- (a) as income of the person making the loan, or (b) as relevant loan interest to which section 369 of ICTA applies (mortgage interest payable under deduction of tax). Interpretation400 Interpretation(1) In this Chapter--
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