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Employment Income: Deductions and Expenses |
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costs of keeping horse to enable employees to perform their duties.4 As most of the established case law concern travel expenses we shall consider sections 337 and 338 (below §18A.2) before 336 (§18A.3). |
Thus the traditional treatment of deductible expenses would begin. However, as we have seen above, the provisions of part 5 for the 2003 Act are more complex than this. As the notes to the Bill make clear (paras 1425 et seq), while sections 336–338 are usually quite adequate for expenses paid by the employee some consistency of treatment is needed when, say, a higher paid employee buys a train ticket and the expense is borne by the employer (a) through a round sum allowance (taxed as earnings under what is now section 62), (b) a specific expense payment (now chapter 3 part 3 ex section 153) (c) a credit card (a credit token) or (d) actually buys the ticket and hands it over (a non-cash voucher). The situation was made worse in the pre-2003 law by a number of cross references to these rules (now sections 336–38) from elsewhere in the legislation. So ITEPA part 5 not only deals with these rules where the expense is paid by the employee but also provides further rules in the other chapters. |
Before turning to the detail of ITEPA part 5 chapter 2 we must note some general rules in part 5 chapter 1. First, section 328(1) provides that the deduction is only allowed against earnings from the employment. This rule is widened for ministers of religion, refined for earnings out of the public revenue and then restricted by a number of rules which require that the expense be set against particular receipts specified.5 |
Section 329 provides that a deduction for expenses is not to exceed the earnings; so the expenses may reduce the tax to nil but cannot give rise to a net loss. Again this rule is widened for ministers of religion and disregarded for certain statutory hypotheses in making other calculations,6 section 329 enacts a Revenue view7 but still looks odd |