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Income Tax (Earnings and Pensions) Act 2003

Type Public General Act

Publication 2003-03-06

Last updated 2026-03-15

State In force

Department Statute Law Database

Source legislation.gov.uk

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Part 1 — Overview

Benefit of living accommodation treated as earnings

1

(1) This Act imposes charges to income tax on—

(a) employment income (see Parts 2 to 7A ),

(b) pension income (see Part 9), and

(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3) This Act also—

(a) confers certain reliefs in respect of liabilities of former employees (see Part 8),

(aa) makes provision for the high income child benefit charge (see Chapter 8 of Part 10),

(b) provides for the assessment, collection and recovery of income tax in respect of employment, pension or social security income that is PAYE income (see Part 11), ...

(ba) allows deductions to be made from such income in respect of certain debts payable to the Commissioners for Her Majesty’s Revenue and Customs (see Part 11), and

Exemption of contributions to registered pension scheme

2

(1) Schedule 1 (abbreviations and defined expressions) applies for the purposes of this Act.

(2) In Schedule 1—

(a) Part 1 gives the meaning of the abbreviated references to Acts and instruments used in this Act, and

(b) Part 2 lists the places where expressions used in this Act are defined or otherwise explained.

(3) Part 2 of Schedule 1 does not apply to expressions used in Chapters 6 to 9 of Part 7 (share incentive plans and other arrangements for acquiring shares): separate indexes relating to these Chapters appear at the end of Schedules 2 to 5.

Part 2 — Employment income: charge to tax

Chapter 1 — Introduction

Exclusions: public offers

3

(1) The structure of the employment income Parts is as follows—

this Part imposes the charge to tax on employment income, and sets out—(a) how the amount charged to tax for a tax year is to be calculated, and(b) who is liable for the tax charged;

Part 3 sets out what are earnings and provides for amounts to be treated as earnings;

Part 4 deals with exemptions from the charge to tax under this Part (and, in some cases, from other charges to tax);

Part 5 deals with deductions from taxable earnings;

Part 6 deals with employment income other than earnings or share-related income; and

Part 7 deals with income and exemptions relating to securities and securities options acquired in connection with an employment.

Part 7A deals with employment income provided through third parties.

(2) In this Act “the employment income Parts” means this Part and Parts 3 to 7A .

Definitions

4

(1) In the employment income Parts “employment” includes in particular—

(a) any employment under a contract of service,

(b) any employment under a contract of apprenticeship, and

(2) In those Parts “employed”, “employee” and “employer” have corresponding meanings.

Securities subject to restriction during relevant period

5

(1) The provisions of the employment income Parts that are expressed to apply to employments apply equally to offices, unless otherwise indicated.

(2) In those provisions as they apply to an office—

(a) references to being employed are to being the holder of the office;

(b) “employee” means the office-holder;

(3) In the employment income Parts “office” includes in particular any position which has an existence independent of the person who holds it and may be filled by successive holders.

Chapter 2 — Tax on employment income

Temporary non-residents

6

(1) The charge to tax on employment income under this Part is a charge to tax on—

(a) general earnings, and

(b) specific employment income.

The meaning of “employment income”, “general earnings” and “specific employment income” is given in section 7.

(2) The amount of general earnings or specific employment income which is charged to tax in a particular tax year is set out in section 9.

(3) The rules in Chapters 4 and 5 of this Part, which are concerned with—

(a) the residence ... of an employee in a tax year, ...

(aa) whether section 809B, 809D or 809E of ITA 2007 (remittance basis) applied to an employee for a tax year, and

(b) the tax year in which amounts are received or remitted to the United Kingdom,

apply for the purposes of the charge to tax on general earnings but not that on specific employment income.

(3A) The rules in Chapter 5B, which are concerned with the matters mentioned in subsection (3)(a) to (b), apply for the purposes of the charge to tax on certain specific employment income arising under Part 7 (securities etc).

(4) The person who is liable for any tax charged on employment income is set out in section 13.

(5) Employment income is not charged to tax under this Part if it is within the charge to tax under

(a) Part 2 of ITTOIA 2005 (trading income) by virtue of section 15 (divers and diving supervisors), 16A (voluntary office-holders: compensation for lost profits), 16B (payments to company directors) or 16C (professionals in practice: incidental income from an office or employment) of that Act, or

(b) Part 3 of CTA 2009 (trading income) by virtue of section 40A (payments to company directors) or 40B (professionals in practice: incidental income from an office or employment) of that Act.

Oil and gas workers on the continental shelf

7

(1) This section gives the meaning for the purposes of the Tax Acts of “employment income”, “general earnings” and “specific employment income”.

(2) “Employment income” means—

(a) earnings within Chapter 1 of Part 3,

(b) any amount treated as earnings (see subsection (5)), or

(3) “General earnings” means—

(a) earnings within Chapter 1 of Part 3, or

(b) any amount treated as earnings (see subsection (5)),

excluding in each case any exempt income.

(4) “Specific employment income” means any amount which counts as employment income (see subsection (6)), excluding any exempt income.

(5) Subsection (2)(b) or (3)(b) refers to any amount treated as earnings under—

(a) Chapters 7 to 10 of this Part (agency workers, workers under arrangements made by intermediaries, and workers providing services through managed service companies),

(b) Chapters 2 to 10 of Part 3 (the benefits code),

(ca) section 402B (termination payments, and other benefits, that cannot benefit from section 403 threshold), or

(d) section 262 of CAA 2001 (balancing charges to be given effect by treating them as earnings).

(6) Subsection (2)(c) or (4) refers to any amount which counts as employment income by virtue of—

(a) Part 6 (income which is not earnings or share-related),

(b) Part 7 (income and exemptions relating to securities and securities options)

(ba) Part 7A (employment income provided through third parties), or

Assessment of penalties

8

For the purposes of the employment income Parts, an amount of employment income within paragraph (a), (b) or (c) of section 7(2) is “exempt income” if, as a result of any exemption in Part 4 or elsewhere, no liability to income tax arises in respect of it as such an amount.

Chapter 3 — Operation of tax charge

Annual returns

9

(1) The amount of employment income which is charged to tax under this Part for a particular tax year is as follows.

(2) In the case of general earnings, the amount charged is the net taxable earnings from an employment in the year.

(3) That amount is calculated under section 11 by reference to any taxable earnings from the employment in the year (see section 10(2)).

(4) In the case of specific employment income, the amount charged is the net taxable specific income from an employment for the year.

(5) That amount is calculated under section 12 by reference to any taxable specific income from the employment for the year (see section 10(3)).

(6) Accordingly, no amount of employment income is charged to tax under this Part for a particular tax year unless—

(a) in the case of general earnings, they are taxable earnings from an employment in that year, or

(b) in the case of specific employment income, it is taxable specific income from an employment for that year.

Meaning of “taxable earnings” and “taxable specific income”

10

(1) This section explains what is meant by “taxable earnings” and “taxable specific income” in the employment income Parts.

(2) “Taxable earnings from an employment in a tax year are to be determined in accordance with Chapters 4 and 5 of this Part.

(3) “Taxable specific income from an employment for a tax year means the full amount of any specific employment income which, by virtue of Part 6 , 7 or 7A or any other enactment, counts as employment income for that year in respect of the employment.

(4) Subsection (3) is subject to Chapter 5B (taxable specific income from employment-related securities etc: internationally mobile employees).

(5) Subsection (3) is also subject to sections 554Z9 to 554Z11 (employment income under Part 7A: remittance basis).

Calculation of “net taxable earnings”

11

(1) For the purposes of this Part the “net taxable earnings” from an employment in a tax year are given by the formula—

$$TE-DE$where—TE means the total amount of any taxable earnings from the employment in the tax year, andDE means the total amount of any deductions allowed from those earnings under provisions listed in section 327(3) to (5) (deductions from earnings: general).$

(2) If the amount calculated under subsection (1) is negative, the net taxable earnings from the employment in the year are to be taken to be nil instead.

(3) Relief may be available under section 128 of ITA 2007 (set-off against general income)—

(a) where TE is negative, or

(b) in certain exceptional cases where the amount calculated under subsection (1) is negative.

(4) If a person has more than one employment in a tax year, the calculation under subsection (1) must be carried out in relation to each of the employments.

Calculation of “net taxable specific income”

12

(1) For the purposes of this Part the “net taxable specific income” from an employment for a tax year is given by the formula—

$$TSI-DSI$where—TSI means the amount of any taxable specific income from the employment for the tax year, andDSI means the total amount of any deductions allowed from that income under provisions of the Tax Acts not included in the lists in section 327 (3) and (4) (deductions from earnings: general).$

(2) If the amount calculated under subsection (1) is negative, the net taxable specific income from the employment for the year is to be taken to be nil instead.

(3) If a person has more than one kind of specific employment income from an employment for a tax year, the calculation under subsection (1) must be carried out in relation to each of those kinds of specific employment income; and in such a case the “net taxable specific income” from the employment for that year is the total of all the amounts so calculated.

Person liable for tax

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(1) The person liable for any tax on employment income under this Part is the taxable person mentioned in subsection (2) or (3).

This is subject to subsection (4).

(2) If the tax is on general earnings, “the taxable person” is the person to whose employment the earnings relate.

(3) If the tax is on specific employment income, “the taxable person” is the person in relation to whom the income is, by virtue of Part 6 , 7 or 7A or any other enactment, to count as employment income.

(4) If the tax is on general earnings received, or remitted to the United Kingdom, after the death of the person to whose employment the earnings relate, the person’s personal representatives are liable for the tax.

(4A) If the tax is on specific employment income received, or remitted to the United Kingdom, after the death of the person in relation to whom the income is, by virtue of Part 7, to count as employment income, the person's personal representatives are liable for the tax.

(4B) Subject to section 554Z12, if—

(a) the tax is on specific employment income under Chapter 2 of Part 7A, and

(b) the relevant step is taken, or (if relevant) the income is remitted to the United Kingdom, after the death of A,

A's personal representatives are liable for the tax.

(4C) Terms used in subsection (4B) have the same meaning as in Part 7A.

(5) If subsection (4) , (4A) or (4B) or section 554Z12(3) applies, the tax is accordingly to be assessed on the personal representatives and is a debt due from and payable out of the estate.

Chapter 4 — Taxable earnings: UK resident employees

Taxable earnings

Taxable earnings under this Chapter: introduction

14

(1) This Chapter sets out for the purposes of this Part what are taxable earnings from an employment in a tax year in cases where section 15 (earnings for year when employee UK resident) applies to general earnings for a tax year.

(2) In this Chapter—

(a) sections 16 and 17 deal with the year for which general earnings are earned, and

(b) sections 18 and 19 deal with the time when general earnings are received.

(3) In the employment income Parts any reference to the charging provisions of this Chapter is a reference to section 15.

UK resident employees

Earnings for year when employee resident, ordinarily resident and domiciled in UK

15

(1) This section applies to general earnings for a tax year for which the employee is UK resident except that, in the case of a split year, it does not apply to any part of those earnings that is excluded.

(1A) General earnings are “excluded” if they—

(a) are attributable to the overseas part of the split year, and

(b) are neither—

(i) general earnings in respect of duties performed in the United Kingdom, nor

(ii) general earnings from overseas Crown employment subject to United Kingdom tax.

(2) The full amount of any general earnings within subsection (1) which are received in a tax year is an amount of “taxable earnings” from the employment in that year.

(3) Subsection (2) applies whether or not the employment is held when the earnings are received.

(4) Any attribution required for the purposes of subsection (1A)(a) is to be done on a just and reasonable basis.

(5) The following provisions of Chapter 5 of this Part apply for the purposes of subsection (1A)(b) as for the purposes of section 27(2)—

(a) section 28 (which defines “general earnings from overseas Crown employment subject to United Kingdom tax”), ...

(b) sections 38 to 41 (which contain rules for determining the place of performance of duties of employment) , and

(c) section 41ZA (which is about determining the extent to which general earnings are in respect of United Kingdom duties).

(6) Subject to any provision made in an order under section 28(5) for the purposes of subsection (1A)(b), provisions made in an order under that section for the purposes of section 27(2) apply for the purposes of subsection (1A)(b) too.

Year for which general earnings are earned

Meaning of earnings “for” a tax year

16

(1) This section applies for determining whether general earnings are general earnings “for” a particular tax year for the purposes of this Chapter.

(2) General earnings that are earned in, or otherwise in respect of, a particular period are to be regarded as general earnings for that period.

(3) If that period consists of the whole or part of a single tax year, the earnings are to be regarded as general earnings “for” that tax year.

(4) If that period consists of the whole or parts of two or more tax years, the part of the earnings that is to be regarded as general earnings “for” each of those tax years is to be determined on a just and reasonable apportionment.

(5) This section does not apply to any amount which is required by a provision of Part 3 to be treated as earnings for a particular tax year.

Treatment of earnings for year in which employment not held

17

(1) This section applies for the purposes of this Chapter in a case where general earnings from an employment would otherwise fall to be regarded as general earnings for a tax year in which the employee does not hold the employment.

(2) If that year falls before the first tax year in which the employment is held, the earnings are to be treated as general earnings for that first tax year.

(3) If that year falls after the last tax year in which the employment was held, the earnings are to be treated as general earnings for that last tax year.

(4) This section does not apply in connection with determining the year for which amounts are to be treated as earnings under Chapters 2 to 10 of Part 3 (the benefits code).

When general earnings are received

Receipt of money earnings

18

(1) General earnings consisting of money are to be treated for the purposes of this Chapter as received at the earliest of the following times—

Rule 1

The time when payment is made of or on account of the earnings.

Rule 2

The time when a person becomes entitled to payment of or on account of the earnings.

Rule 3

If the employee is a director of a company and the earnings are from employment with the company (whether or not as director), whichever is the earliest of—

(a) the time when sums on account of the earnings are credited in the company’s accounts or records (whether or not there is any restriction on the right to draw the sums);

(b) if the amount of the earnings for a period is determined by the end of the period, the time when the period ends;

(c) if the amount of the earnings for a period is not determined until after the period has ended, the time when the amount is determined.

(2) Rule 3 applies if the employee is a director of the company at any time in the tax year in which the time mentioned falls.

(3) In this section “director” means—

(a) in relation to a company whose affairs are managed by a board of directors or similar body, a member of that body,

(b) in relation to a company whose affairs are managed by a single director or similar person, that director or person, and

and includes any person in accordance with whose directions or instructions the directors of the company (as defined above) are accustomed to act.

(4) For the purposes of subsection (3) a person is not to be regarded as a person in accordance with whose directions or instructions the directors of the company are accustomed to act merely because the directors act on advice given by that person in a professional capacity.

(5) Where this section applies—

(a) to a payment on account of general earnings, or

(b) to sums on account of general earnings,

it so applies for the purpose of determining the time when an amount of general earnings corresponding to the amount of that payment or those sums is to be treated as received for the purposes of this Chapter.

Receipt of non-money earnings

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(1) General earnings not consisting of money are to be treated for the purposes of this Chapter as received at the following times.

(2) If an amount is treated as earnings for a particular tax year under any of the following provisions, the earnings are to be treated as received in that year—

section 81 (taxable benefits: cash vouchers),

section 94 or 94A (taxable benefits: credit-tokens),

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

Chapter 6 of Part 3 (taxable benefits: cars, vans and related benefits),

Chapter 7 of Part 3 (taxable benefits: loans),

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

section 222 (payments treated as earnings: payments on account of tax where deduction not possible),

section 223 (payments treated as earnings: payments on account of director’s tax).

section 226A (amount treated as earnings: employee shareholder shares). ,

(3) If an amount is treated as earnings under section 87 or 87A (taxable benefits: non-cash vouchers), the earnings are to be treated as received in the tax year mentioned in section 88.

(4) If subsection (2) or (3) does not apply, the earnings are to be treated as received at the time when the benefit is provided.

Chapter 5 — Taxable earnings: remittance basis rules and rules for non-uk resident employees

Taxable earnings

Taxable earnings under this Chapter: introduction

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(1) This Chapter contains provision for determining how much of the following are taxable earnings from an employment in a tax year—

(a) general earnings that are for a tax year for which section 809B, 809D or 809E of ITA 2007 (remittance basis) applied to the employee (being a tax year before tax year 2025-26), and

(b) general earnings that are for a tax year for which the employee is non-UK resident.

(2) In this Chapter—

(a) sections 29 and 30 deal with the year for which general earnings are earned,

(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(d) sections 38 to 41 deal with the place where the duties of an employment are performed.

(3) In the employment income Parts any reference to the charging provisions of this Chapter is a reference to any of sections 22, 26 and 27.

Remittance basis rules for employees outside section 26

Earnings for year when employee resident and ordinarily resident, but not domiciled, in UK, except chargeable overseas earnings

21

(1) This section applies to general earnings for a tax year in which the employee is resident and ordinarily resident, but not domiciled, in the United Kingdom except to the extent that they are chargeable overseas earnings for that year.

(2) The full amount of any general earnings within subsection (1) which are received in a tax year is an amount of “taxable earnings” from the employment in that year.

(3) Subsection (2) applies—

(a) whether the earnings are for that year or for some other tax year, and

(b) whether or not the employment is held at the time when the earnings are received.

(4) Section 23 applies for calculating how much of an employee’s general earnings are “chargeable overseas earnings” for a tax year, and are therefore within section 22(1) rather than subsection (1) above.

Chargeable overseas earnings for year when employee resident and ordinarily resident, but not domiciled, in UK

22

(1) This section applies to general earnings for a tax year , to the extent that they are chargeable overseas earnings for that year, if—

(a) section 809B, 809D or 809E of ITA 2007 (remittance basis) applied to the employee for that year, and

(b) the employee did not meet the requirement of section 26A for that year.

(2) The full amount of any general earnings within subsection (1) which are remitted to the United Kingdom in a tax year is an amount of “taxable earnings” from the employment in that year.

(3) Subsection (2) applies whether or not the employment is held when the earnings are remitted.

(4) Section 23 applies for calculating how much of an employee’s general earnings are “chargeable overseas earnings” for a tax year ....

(5) Where any chargeable overseas earnings are taxable earnings under subsection (2), any deduction taken into account under section 23(3) in calculating the amount of the chargeable overseas earnings—

(a) cannot then be deducted under section 11 from those taxable earnings, but

(b) may be deducted under that section from any taxable earnings under section 15.

(6) See Chapter A1 of Part 14 of ITA 2007 for the meaning of “remitted to the United Kingdom” etc.

(7) Section 15(1) does not apply to general earnings within subsection (1).

Calculation of “chargeable overseas earnings”

23

(1) This section applies for calculating how much of an employee’s general earnings for a tax year are “chargeable overseas earnings” for the purposes of section 22.

(1A) But none of an employee's general earnings from an employment for a tax year are to be “chargeable overseas earnings” if section 24A applies in relation to the employment for the tax year.

(2) General earnings for a tax year are “overseas earnings” for that year if—

(a) section 809B, 809D or 809E of ITA 2007 (remittance basis) applied to the employee for that year,

(aa) the employee did not meet the requirement of section 26A for that year,

(b) the employment was with a foreign employer, and

(3) To calculate the amount of “chargeable overseas earnings” for a tax year—

Step 1

Identify—

(a) in the case of a tax year that is not a split year, the full amount of the overseas earnings for that year, and

(b) in the case of a split year, so much of the full amount of the overseas earnings for that year as is attributable to the UK part of the year.

Step 2

Subtract any amounts that would (assuming they were taxable earnings) be allowed to be deducted from the earnings identified under step 1 under—

(a) section 232 or Part 5 (deductions allowed from earnings),

(b) sections 188 to 194 of FA 2004 (contributions to registered pension schemes), or

(d) section 262 of CAA 2001 (capital allowances to be given effect by treating them as deductions from earnings).

Step 3

Apply any limit imposed by section 24 (limit where duties of associated employment performed in UK).

The result is the chargeable overseas earnings for the tax year.

(4) Any attribution required for the purposes of step 1 or step 2 in subsection (3) is to be done on a just and reasonable basis.

Limit on chargeable overseas earnings where duties of associated employment performed in UK

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(1) This section imposes a limit on how much of an employee’s general earnings are chargeable overseas earnings for a tax year under section 23 if—

(a) in that year the employee holds associated employments as well as the employment to which subsection (2) of that section applies (“the relevant employment”), and

(b) the duties of the associated employments are not performed wholly outside the United Kingdom.

(2) The limit is the proportion of the aggregate earnings for that year from all the employments concerned that is reasonable having regard to—

(a) the nature of and time devoted to each of the following—

(i) the duties performed outside the United Kingdom, and

(ii) those performed in the United Kingdom, and

(b) all other relevant circumstances.

(2A) If the tax year is a split year as respects the employee, subsection (2) has effect as if for “the aggregate earnings for that year from all the employments concerned” there were substituted “ so much of the aggregate earnings for that year from all the employments concerned as is attributable to the UK part of that year ”.

(3) For the purposes of subsection (2) “the aggregate earnings for a year from all the employments concerned” means the amount produced by aggregating the full amount of earnings from each of those employments for the year mentioned in subsection (1) so far as remaining after subtracting any amounts of the kind mentioned in step 2 in section 23(3).

(3A) Any attribution required for the purposes of subsection (2A) is to be done on a just and reasonable basis.

(4) In this section—

(a) “the employments concerned” means the relevant employment and the associated employments;

(b) “associated employments” means employments with the same employer or with associated employers.

(5) The following rules apply to determine whether employers are associated—

Rule A

An individual is associated with a partnership or company if that individual has control of the partnership or company.

Rule B

A partnership is associated with another partnership or with a company if one has control of the other or both are under the control of the same person or persons.

Rule C

A company is associated with another company if one has control of the other or both are under the control of the same person or persons.

(6) In subsection (5)—

(a) in rules A and B “control” has the meaning given by section 995 of ITA 2007 (in accordance with section 719 of this Act), and

(b) in rule C “control” means control within the meaning given by sections 450 and 451 of CTA 2010 (meaning of expressions relating to close companies).

(7) If an amount of chargeable overseas earnings is reduced under step 3 in section 23(3) as a result of applying any limit imposed by this section, the amount of general earnings corresponding to the reduction remains an amount of general earnings within section 15(1).

Remittance basis rules: employees who met section 26A requirement

UK-based earnings for year when employee resident, but not ordinarily resident, in UK

25

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Foreign earnings for year when employee resident, but not ordinarily resident, in UK

26

(1) This section applies to general earnings for a tax year where section 809B, 809D or 809E of ITA 2007 (remittance basis) applied to the employee for that year and the employee met the requirement of section 26A for that year, if the general earnings meet all of the following conditions—

(a) they are neither—

(i) general earnings in respect of duties performed in the United Kingdom, nor

(ii) general earnings from overseas Crown employment subject to United Kingdom tax, and

(b) if the tax year is a split year as respects the employee, they are attributable to the UK part of the year.

(2) The full amount of any general earnings within subsection (1) which are remitted to the United Kingdom in a tax year is an amount of “taxable earnings” from the employment in that year.

(3) Subsection (2) applies whether or not the employment is held when the earnings are remitted.

(4) Section 28 explains what is meant by “general earnings from overseas Crown employment subject to United Kingdom tax”.

(5) See Chapter A1 of Part 14 of ITA 2007 for the meaning of “remitted to the United Kingdom” etc.

(5A) Any attribution required for the purposes of subsection (1)(b) is to be done on a just and reasonable basis.

(6) Section 15(1) does not apply to general earnings within subsection (1).

Employees not resident in UK

UK-based earnings for year when employee not resident in UK

27

(1) This section applies to general earnings for a tax year for which the employee is not resident in the United Kingdom if they are—

(a) general earnings in respect of duties performed in the United Kingdom, ...

(b) general earnings from overseas Crown employment subject to United Kingdom tax , or

(c) general earnings to which section 402B (termination payments, and other benefits, that cannot benefit from the section 403 threshold, to be treated as earnings) applies.

(2) The full amount of any general earnings within subsection (1)(a) or (b) which are received in a tax year is an amount of “taxable earnings” from the employment in that year.

(2A) The percentage of the general earnings within subsection (1)(c) that are an amount of “taxable earnings” from the employment in the tax year in which they are received is given by—

$$A B x 100$where—B is the total amount of general earnings from the employment that it is reasonable to assume the employee would have received in respect of the post-employment notice period (within the meaning given by section 402E(5)) if the employee's employment had not been terminated until the end of that period, andA is the total amount of those general earnings that it is reasonable to assume would have been taxable earnings by virtue of subsection (1)(a) or (b).$

(3) Subsections (2) and (2A) apply whether or not the employment is held when the earnings are received.

(4) Section 28 explains what is meant by “general earnings from overseas Crown employment subject to United Kingdom tax”.

(5) Sections 18 and 19 (time when earnings are received) apply for the purposes of this section.

Special class of earnings for purposes of sections 25 to 27

Meaning of “general earnings from overseas Crown employment subject to UK tax”

28

(1) This section explains for the purposes of sections 25 to 27 what is meant by “general earnings from overseas Crown employment subject to United Kingdom tax”.

(2) “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 Wales, Scotland or Northern Ireland.

(3) “General earnings from overseas Crown employment” means general earnings from such employment in respect of duties performed outside the United Kingdom.

(4) Such earnings are to be taken as being “subject to United Kingdom tax” unless they fall within any exception contained in an order under subsection (5).

(5) the Commissioners for Her Majesty’s Revenue and Customs may make an order excepting from the operation of sections 25(2) and 27(2)—

(a) general earnings of any description of employee specified in the order;

(b) general earnings from any description of employment so specified.

(6) The Commissioners may make the order if they consider that such earnings should not be subject to those provisions having regard to the international obligations of Her Majesty’s Government and such other matters as appear to them to be relevant.

(7) An order may make provision by reference to all or any of the following—

(a) the residence or nationality of the employee;

(b) whether the employee was engaged in or outside the United Kingdom;

(8) Subsection (7) does not affect the generality of the power to make provision by reference to such factors as the Board consider appropriate.

Year for which general earnings are earned

Meaning of earnings “for” a tax year

29

(1) This section applies for determining whether general earnings are general earnings “for” a particular tax year for the purposes of this Chapter.

(2) General earnings that are earned in, or otherwise in respect of, a particular period are to be regarded as general earnings for that period.

(3) If that period consists of the whole or part of a single tax year, the earnings are to be regarded as general earnings “for” that tax year.

(4) If that period consists of the whole or parts of two or more tax years, the part of the earnings that is to be regarded as general earnings “for” each of those tax years is to be determined on a just and reasonable apportionment.

(5) This section does not apply to any amount which is required by a provision of Part 3 to be treated as earnings for a particular tax year.

Treatment of earnings for year in which employment not held

30

(1) This section applies for the purposes of this Chapter in a case where general earnings from an employment would otherwise fall to be regarded as general earnings for a tax year in which the employee does not hold the employment.

(2) If that year falls before the first tax year in which the employment is held, the earnings are to be treated as general earnings for that first tax year.

(3) If that year falls after the last tax year in which the employment was held, the earnings are to be treated as general earnings for that last tax year.

(4) This section does not apply in connection with determining the year for which amounts are to be treated as earnings under Chapters 2 to 10 of Part 3 (the benefits code).

...

Receipt of money earnings

31

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Receipt of non-money earnings

32

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Earnings remitted to UK

33

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Earnings remitted to UK: further provisions about UK-linked debts

34

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Relief for delayed remittances

35

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Election in respect of delayed remittances

36

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Claims for relief on delayed remittances

37

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Place of performance of duties of employment

Earnings for period of absence from employment

38

(1) This section applies if a person ordinarily performs the whole or part of the duties of an employment in the United Kingdom.

(2) General earnings for a period of absence from the employment are to be treated for the purposes of this Chapter as general earnings for duties performed in the United Kingdom except in so far as they would, but for that absence, have been general earnings for duties performed outside the United Kingdom.

Duties in UK merely incidental to duties outside UK

39

(1) This section applies if in a tax year an employment is in substance one whose duties fall to be performed outside the United Kingdom.

(2) 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 this Chapter as performed outside the United Kingdom.

(3) This section does not affect any question as to—

(a) where any duties are performed, or

(b) whether a person is absent from the United Kingdom,

for the purposes of section 378 (deduction from seafarers' earnings: eligibility), and section 383 (place of performance of incidental duties) applies instead.

Duties on board vessel or aircraft

40

(1) Duties which a person performs on a vessel engaged on a voyage not extending to a port outside the United Kingdom are to be treated for the purposes of this Chapter as performed in the United Kingdom.

(2) Duties which a person resident in the United Kingdom performs on a vessel or aircraft engaged—

(a) on a voyage or journey beginning or ending in the United Kingdom, or

(b) on a part beginning or ending in the United Kingdom of any other voyage or journey,

are to be treated as performed in the United Kingdom for the purposes of this Chapter.

(3) Subsection (2) does not, however, apply for the purposes of section 24(1)(b) (limit on chargeable overseas earnings under section 23 where duties of associated employment performed in UK) in relation to any duties of a person’s employment if—

(a) the employment is as a seafarer, and

(b) the duties are performed on a ship.

(4) Instead, any duties of the employment which are performed on a ship engaged—

(a) on a voyage beginning or ending outside the United Kingdom (but excluding any part of it beginning and ending there), or

(b) on a part beginning or ending outside the United Kingdom of any other voyage,

are to be treated as performed outside the United Kingdom for the purposes of section 24(1)(b).

(5) For the purposes of subsections (3) and (4)—

(a) employment “as a seafarer” means an employment consisting of the performance of duties on a ship or of such duties and others incidental to them;

(b) “ship” does not include an offshore installation;

(c) the areas designated under section 1(7) of the Continental Shelf Act 1964 (c. 29) are treated as part of the United Kingdom.

Employment in UK sector of continental shelf

41

(1) General earnings in respect of duties performed in the UK sector of the continental shelf in connection with exploration or exploitation activities are to be treated for the purposes of this Chapter as general earnings in respect of duties performed in the United Kingdom.

(2) In this section—

“the UK sector of the continental shelf” means the areas designated under section 1(7) of the Continental Shelf Act 1964, and

“exploration or exploitation activities” means activities carried on in connection with the exploration or exploitation of so much of the seabed and subsoil and their natural resources as is situated in the United Kingdom or the UK sector of the continental shelf.

Chapter 6 — Disputes as to domicile or ordinary residence

Board to determine dispute as to domicile or ordinary residence

42

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Appeal against Board’s decision on domicile or ordinary residence

43

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Chapter 7 — Application of provisions to agency workers

Agency workers

Treatment of workers supplied by agencies

44

(1) This section applies if—

(a) an individual (“the worker”) personally provides services (which are not excluded services) to another person (“the client”),

(b) there is a contract between—

(i) the client or a person connected with the client, and

(ii) a person other than the worker, the client or a person connected with the client (“the agency”), and

(i) the services are provided, or

(ii) the client or any person connected with the client pays, or otherwise provides consideration, for the services.

(2) But this section does not apply if—

(a) it is shown that the manner in which the worker provides the services is not subject to (or to the right of) supervision, direction or control by any person, or

(b) remuneration receivable by the worker in consequence of providing the services constitutes employment income of the worker apart from this Chapter.

(3) If this section applies—

(a) the worker is to be treated for income tax purposes as holding an employment with the agency, the duties of which consist of the services the worker provides to the client, and

(b) all remuneration receivable by the worker (from any person) in consequence of providing the services is to be treated for income tax purposes as earnings from that employment,

but this is subject to subsections (4) to (6).

(4) Subsection (5) applies if (whether before or after the worker begins to provide the services)—

(a) the client provides the agency with a fraudulent document which is intended to constitute evidence that, by virtue of subsection (2)(a), this section does not or will not apply, or

(b) a relevant person provides the agency with a fraudulent document which is intended to constitute evidence that, by virtue of subsection (2)(b), this section does not or will not apply.

(5) In relation to services the worker provides to the client after the fraudulent document is provided—

(a) subsection (3) does not apply,

(b) the worker is to be treated for income tax purposes as holding an employment with the client or (as the case may be) with the relevant person, the duties of which consist of the services, and

(c) all remuneration receivable by the worker (from any person) in consequence of providing the services is to be treated for income tax purposes as earnings from that employment.

(6) In subsections (4) and (5) “relevant person” means a person, other than the client, the worker or a person connected with the client or with the agency, who—

(a) is resident, or has a place of business, in the United Kingdom, and

(b) is party to a contract with the agency or a person connected with the agency, under or in consequence of which—

(i) the services are provided, or

(ii) the agency, or a person connected with the agency, makes payments in respect of the services.

Arrangements with agencies

45

If—

(a) an individual (“the worker”), with a view to personally providing services (which are not excluded services) to another person (“the client”), enters into arrangements with a third person ..., and

(b) the arrangements are such that the services (if and when they are provided) will be treated for income tax purposes under section 44 as duties of an employment held by the worker ...,

any remuneration receivable under or in consequence of the arrangements is to be treated for income tax purposes as earnings from that employment.

Cases involving unincorporated bodies etc.

46

(1) Section 44 also applies—

(a) if the worker personally provides... the services in question as a partner in a firm or a member of an unincorporated body;

(b) if the agency in question is an unincorporated body of which the worker is a member.

(2) In a case within subsection (1)(a), remuneration receivable in consequence of the worker providing the services is to be treated for income tax purposes as income of the worker and not as income of the firm or body.

Supplementary

Interpretation of this Chapter

47

(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(2) In this Chapter “excluded services” means—

(a) services as an actor, singer, musician or other entertainer or as a fashion, photographic or artist’s model, or

(b) services provided wholly—

(i) in the worker’s own home, or

(ii) at other premises which are neither controlled or managed by the client nor prescribed by the nature of the services.

(3) For the purposes of this Chapter “remuneration”—

(a) does not include anything that would not have constituted employment income of the worker if it had been receivable in connection with an employment apart from this Chapter, but

(b) subject to paragraph (a), includes every form of payment, gratuity, profit and benefit.

Chapter 8 — Workers' services provided through intermediaries to small clients

Application of this Chapter

Scope of this Chapter

48

(1) This Chapter has effect with respect to the provision of services through an intermediary in a case where the services are provided to a person who is not a public authority and who either—

(a) qualifies as small for a tax year, or

(b) does not have a UK connection for a tax year.

(2) Nothing in this Chapter—

(a) affects the operation of Chapter 7 of this Part,

(aa) applies to services provided by a managed service company (within the meaning of Chapter 9 of this Part), or

(b) applies to payments or transfers to which section 966(3) or (4) of ITA 2007 applies (visiting performers: duty to deduct and account for sums representing income tax) .

(3) In this Chapter “public authority” has the same meaning as in Chapter 10 of this Part (see section 61L).

(4) For provisions determining when a person qualifies as small for a tax year, see sections 60A to 60G.

(5) For provision determining when a person has a UK connection for a tax year, see section 60I.

Engagements to which this Chapter applies

49

(1) This Chapter applies where—

(a) an individual (“the worker”) personally performs, or is under an obligation personally to perform, services for another person (“the client”),

(aa) the client is not a public authority,

(b) the services are provided not under a contract directly between the client and the worker but under arrangements involving a third party (“the intermediary”), and

(i) if the services were provided under a contract directly between the client and the worker, the worker would be regarded for income tax purposes as an employee of the client or the holder of an office under the client, or

(ii) the worker is an office-holder who holds that office under the client and the services relate to the office.

(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3) The reference in subsection (1)(b) to a “third party” includes a partnership or unincorporated body of which the worker is a member.

(4) The circumstances referred to in subsection (1)(c) include the terms on which the services are provided, having regard to the terms of the contracts forming part of the arrangements under which the services are provided.

(4A) Holding office as statutory auditor of the client does not count as holding office under the client for the purposes of subsection (1)(c), and here “statutory auditor” means a statutory auditor within the meaning of Part 42 of the Companies Act 2006 (see section 1210 of that Act).

(5) In this Chapter “engagement to which this Chapter applies” means any such provision of services as is mentioned in subsection (1).

Worker treated as receiving earnings from employment

50

(1) If, in the case of an engagement to which this Chapter applies, in any tax year—

(za) the client qualifies as small or does not have a UK connection,

(a) the conditions specified in section 51, 52 or 53 are met in relation to the intermediary, and

(b) the worker, or an associate of the worker—

(i) receives from the intermediary, directly or indirectly, a payment or benefit that is not employment income, or

(ii) has rights which entitle, or which in any circumstances would entitle, the worker or associate to receive from the intermediary, directly or indirectly, any such payment or benefit,

the intermediary is treated as making to the worker, and the worker is treated as receiving, in that year a payment which is to be treated as earnings from an employment (“the deemed employment payment”).

(2) A single payment is treated as made in respect of all engagements in relation to which the intermediary is treated as making a payment to the worker in the tax year.

(3) The deemed employment payment is treated as made at the end of the tax year, unless section 57 applies (earlier date of deemed payment in certain cases).

(4) In this Chapter “the relevant engagements”, in relation to a deemed employment payment, means the engagements mentioned in subsection (2).

(5) The condition in paragraph (za) of subsection (1) is to be ignored if—

(a) the client concerned is an individual, and

(b) the services concerned are performed otherwise than for the purposes of the client's business.

(6) For the purposes of paragraph (za) of subsection (1) the client is to be treated as not qualifying as small for the tax year concerned if the client is treated as medium or large for that tax year by reason of section 61TA(3)(a).

Conditions of liability where intermediary is a company

51

(1) Where the intermediary is a company the conditions are that the intermediary is not an associated company of the client that falls within subsection (2) and either—

(a) the worker has a material interest in the intermediary, or

(b) the payment or benefit mentioned in section 50(1)(b)—

(i) is received or receivable by the worker directly from the intermediary, and

(ii) can reasonably be taken to represent remuneration for services provided by the worker to the client.

(2) An associated company of the client falls within this subsection if it is such a company by reason of the intermediary and the client being under the control—

(a) of the worker, or

(b) of the worker and other persons.

(3) A worker is treated as having a material interest in a company if—

(a) the worker, alone or with one or more associates of the worker, or

(b) an associate of the worker, with or without other such associates,

has a material interest in the company.

(4) For this purpose a material interest means—

(a) beneficial ownership of, or the ability to control, directly or through the medium of other companies or by any other indirect means, more than 5% of the ordinary share capital of the company; or

(b) possession of, or entitlement to acquire, rights entitling the holder to receive more than 5% of any distributions that may be made by the company; or

(c) where the company is a close company, possession of, or entitlement to acquire, rights that would in the event of the winding up of the company, or in any other circumstances, entitle the holder to receive more than 5% of the assets that would then be available for distribution among the participators.

(5) In subsection (4)(c) “participator” has the meaning given by section 454 of CTA 2010.

Conditions of liability where intermediary is a partnership

52

(1) Where the intermediary is a partnership the conditions are as follows.

(2) In relation to any payment or benefit received or receivable by the worker as a member of the partnership the conditions are—

(a) that the worker, alone or with one or more relatives, is entitled to 60% or more of the profits of the partnership; or

(b) that most of the profits of the partnership concerned derive from the provision of services under engagements to which one or other of this Chapter and Chapter 10 applies—

(i) to a single client, or

(ii) to a single client together with associates of that client; or

(c) that under the profit sharing arrangements the income of any of the partners is based on the amount of income generated by that partner by the provision of services under engagements to which one or other of this Chapter and Chapter 10 applies.

In paragraph (a) “relative” means spouse or civil partner , parent or child or remoter relation in the direct line, or brother or sister.

(3) In relation to any payment or benefit received or receivable by the worker otherwise than as a member of the partnership, the conditions are that the payment or benefit—

(a) is received or receivable by the worker directly from the intermediary, and

(b) can reasonably be taken to represent remuneration for services provided by the worker to the client.

Conditions of liability where intermediary is an individual

53

Where the intermediary is an individual the conditions are that the payment or benefit—

(a) is received or receivable by the worker directly from the intermediary, and

(b) can reasonably be taken to represent remuneration for services provided by the worker to the client.

The deemed employment payment

Calculation of deemed employment payment

54

(1) The amount of the deemed employment payment for a tax year (“the year”) is the amount resulting from the following steps—

Step 1

Find (applying section 55) the total amount of all payments and benefits received by the intermediary in the year in respect of the relevant engagements, and reduce that amount by 5%.

Step 2

Add (applying that section) the amount of any payments and benefits received by the worker in the year in respect of the relevant engagements, otherwise than from the intermediary, that—

(a) are not chargeable to income tax as employment income, and

(b) would be so chargeable if the worker were employed by the client.

Step 3

Deduct (applying Chapters 1 to 5 of Part 5) the amount of any expenses met in the year by the intermediary that would have been deductible from the taxable earnings from the employment if—

(a) the worker had been employed by the client, and

(b) the expenses had been met by the worker out of those earnings.

If the result at this or any later point is nil or a negative amount, there is no deemed employment payment.

Step 4

Deduct the amount of any capital allowances in respect of expenditure incurred by the intermediary that could have been deducted from employment income under section 262 of CAA 2001 (employments and offices) if the worker had been employed by the client and had incurred the expenditure.

Step 5

Deduct any contributions made in the year for the benefit of the worker by the intermediary to a registered pension scheme that if made by an employer for the benefit of an employee would not be chargeable to income tax as income of the employee.

This does not apply to excess contributions made and later repaid.

Step 6

Deduct the amount of any employer’s national insurance contributions paid by the intermediary for the year in respect of the worker.

Step 7

Deduct the amount of any payments and benefits received in the year by the worker from the intermediary—

(a) in respect of which the worker is chargeable to income tax as employment income, and

(b) which do not represent items in respect of which a deduction was made under step 3.

Step 8

Assume that the result of step 7 represents an amount together with employer’s national insurance contributions on it, and deduct what (on that assumption) would be the amount of those contributions.

The result is the deemed employment payment.

(1A) For the purposes of step 1 of subsection (1), any payment or benefit which is employment income of the worker by virtue of section 863G(4) of ITTOIA 2005 (salaried members of limited liability partnerships: anti-avoidance) is to be ignored.

(2) If section 61 of the Finance Act 2004 applies (sub-contractors in the construction industry: payments to be made under deduction), the intermediary is treated for the purposes of step 1 of subsection (1) as receiving the amount that would have been received had no deduction been made under that section.

(3) In step 3 of subsection (1), the reference to expenses met by the intermediary includes—

(a) expenses met by the worker and reimbursed by the intermediary, and

(b) where the intermediary is a partnership and the worker is a member of the partnership, expenses met by the worker for and on behalf of the partnership.

(4) In step 3 of subsection (1), the expenses deductible include the amount of any mileage allowance relief for the year which the worker would have been entitled to in respect of the use of a vehicle falling within subsection (5) if—

(a) the worker had been employed by the client, and

(b) the vehicle had not been a company vehicle (within the meaning of Chapter 2 of Part 4).

(5) A vehicle falls within this subsection if—

(a) it is provided by the intermediary for the worker, or

(b) where the intermediary is a partnership and the worker is a member of the partnership, it is provided by the worker for the purposes of the business of the partnership.

(6) Where, on the assumptions mentioned in paragraphs (a) and (b) of step 3 of subsection (1), the deductibility of the expenses is determined under sections 337 to 342 (travel expenses), the duties performed under the relevant engagements are treated as duties of a continuous employment with the intermediary.

(7) In step 7 of subsection (1), the amounts deductible include any payments received in the year from the intermediary that—

(a) are exempt from income tax by virtue of section 229 or 233 (mileage allowance payments and passenger payments), and

(b) do not represent items in respect of which a deduction was made under step 3.

(8) For the purposes of subsection (1) any necessary apportionment is to be made on a just and reasonable basis of amounts received by the intermediary that are referable—

(a) to the services of more than one worker, or

(b) partly to the services of the worker and partly to other matters.

Application of rules relating to earnings from employment

55

(1) The following provisions apply in relation to the calculation of the deemed employment payment.

(2) A “payment or benefit” means anything that, if received by an employee for performing the duties of an employment, would be earnings from the employment.

(3) The amount of a payment or benefit is taken to be—

(a) in the case of a payment or cash benefit, the amount received, and

(b) in the case of a non-cash benefit, the cash equivalent of the benefit.

(4) The cash equivalent of a non-cash benefit is taken to be—

(a) the amount that would be earnings if the benefit were earnings from an employment, or

(b) in the case of living accommodation, whichever is the greater of that amount and the cash equivalent determined in accordance with section 398(2).

(5) A payment or benefit is treated as received—

(a) in the case of a payment or cash benefit, when payment is made of or on account of the payment or benefit;

(b) in the case of a non-cash benefit that is calculated by reference to a period within the tax year, at the end of that period;

(c) in the case of a non-cash benefit that is not so calculated, when it would have been treated as received for the purposes of Chapter 4 or 5 of this Part (see section 19 or 32) if—

(i) the worker had been an employee, and

(ii) the benefit had been provided by reason of the employment.

Application of Income Tax Acts in relation to deemed employment

56

(1) The Income Tax Acts (in particular, the PAYE provisions) apply in relation to the deemed employment payment as follows.

(2) They apply as if—

(a) the worker were employed by the intermediary, and

(b) the relevant engagements were undertaken by the worker in the course of performing the duties of that employment.

(3) The deemed employment payment is treated in particular—

(a) as taxable earnings from the employment for the purpose of securing that any deductions under Chapters 2 to 6 of Part 5 do not exceed the deemed employment payment; and

(b) as taxable earnings from the employment for the purposes of section 232.

(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(6) Where the intermediary is a partnership or unincorporated association, the deemed employment payment is treated as received by the worker in the worker’s personal capacity and not as income of the partnership or association.

(7) Where—

(a) the worker is resident in the United Kingdom, and

(b) the services in question are provided in the United Kingdom, ...

the intermediary is treated as having a place of business in the United Kingdom, whether or not it in fact does so.

(8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Supplementary provisions

Earlier date of deemed employment payment in certain cases

57

(1) If in any tax year—

(a) a deemed employment payment is treated as made, and

(b) before the date on which the payment would be treated as made under section 50(2) any relevant event (as defined below) occurs in relation to the intermediary,

the deemed employment payment for that year is treated as having been made immediately before that event or, if there is more than one, immediately before the first of them.

(2) Where the intermediary is a company the following are relevant events—

(a) the company ceasing to trade;

(b) where the worker is a member of the company, the worker ceasing to be such a member;

(d) where the worker is employed by the company, the worker ceasing to be so employed.

(3) Where the intermediary is a partnership the following are relevant events—

(a) the dissolution of the partnership or the partnership ceasing to trade or a partner ceasing to act as such;

(b) where the worker is employed by the partnership, the worker ceasing to be so employed.

(4) Where the intermediary is an individual and the worker is employed by the intermediary, it is a relevant event if the worker ceases to be so employed.

(5) The fact that the deemed employment payment is treated as made before the end of the tax year does not affect what receipts and other matters are taken into account in calculating its amount.

Relief in case of distributions by intermediary

58

(1) A claim for relief may be made under this section where the intermediary—

(a) is a company,

(b) is treated as making a deemed employment payment in any tax year, and

(c) either in that tax year (whether before or after that payment is treated as made), or in a subsequent tax year, makes a distribution (a “relevant distribution”).

(2) A claim for relief under this section must be made—

(a) by the intermediary by notice to an officer of Revenue and Customs , and

(b) within 5 years after the 31st January following the tax year in which the distribution is made.

(3) If on a claim being made an officer of Revenue and Customs is satisfied that relief should be given in order to avoid a double charge to tax, the officer must direct the giving of such relief by way of amending any assessment, by discharge or repayment of tax, or otherwise, as appears to the officer appropriate.

(4) Relief under this section is given by setting the amount of the deemed employment payment against the relevant distribution so as to reduce the distribution.

(5) In the case of more than one relevant distribution, an officer of Revenue and Customs must exercise the power conferred by this section so as to secure that so far as practicable relief is given by setting the amount of a deemed employment payment—

(a) against relevant distributions of the same tax year before those of other years,

(b) against relevant distributions received by the worker before those received by another person, and

(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Provisions applicable to multiple intermediaries

59

(1) The provisions of this section apply where in the case of an engagement to which this Chapter applies the arrangements involve more than one relevant intermediary.

(2) All relevant intermediaries in relation to the engagement are jointly and severally liable, subject to subsection (3), to account for any amount required under the PAYE provisions to be deducted from a deemed employment payment treated as made by any of them—

(a) in respect of that engagement, or

(b) in respect of that engagement together with other engagements.

(3) An intermediary is not so liable if it has not received any payment or benefit in respect of that engagement or any such other engagement as is mentioned in subsection (2)(b).

(4) Subsection (5) applies where a payment or benefit has been made or provided, directly or indirectly, from one relevant intermediary to another in respect of the engagement.

(5) In that case, the amount taken into account in relation to any intermediary in step 1 or step 2 of section 54(1) is reduced to such extent as is necessary to avoid double-counting having regard to the amount so taken into account in relation to any other intermediary.

(6) Except as provided by subsections (2) to (5), the provisions of this Chapter apply separately in relation to each relevant intermediary.

(7) In this section “relevant intermediary” means an intermediary in relation to which the conditions specified in section 51, 52 or 53 are met.

Meaning of “associate”

60

(1) In this Chapter “associate”—

(a) in relation to an individual, has the meaning given by section 448 of CTA 2010, subject to the following provisions of this section;

(b) in relation to a company, means a person connected with the company; and

(2) Where an individual has an interest in shares or obligations of the company as a beneficiary of an employee benefit trust, the trustees are not regarded as associates of the individual by reason only of that interest except in the following circumstances.

(3) The exception is where—

(a) the individual, either alone or with any one or more associates of the individual, or

(b) any associate of the individual, with or without other such associates,

has at any time on or after 14th March 1989 been the beneficial owner of, or able (directly or through the medium of other companies or by any other indirect means) to control more than 5% of the ordinary share capital of the company.

(4) In subsection (3) “associate” does not include the trustees of an employee benefit trust as a result only of the individual’s having an interest in shares or obligations of the trust.

(5) Sections 549 to 554 (attribution of interests in companies to beneficiaries of employee benefit trusts) apply for the purposes of subsection (3) as they apply for the purposes of the provisions listed in section 549(2).

(6) In this section “employee benefit trust” has the meaning given by sections 550 and 551.

Interpretation

61

(1) In this Chapter—

“associate” has the meaning given by section 60;

“associated company” has the meaning given by section 449 of CTA 2010;

“business” means any trade, profession or vocation and includes a UK property business within the meaning of Chapter 2 of Part 3 of ITTOIA 2005 or Chapter 2 of Part 4 of CTA 2009;

“company” (except in sections 60A to 60G) means a body corporate or unincorporated association, and does not include a partnership;

“employer’s national insurance contributions” means secondary Class 1 or Class 1A national insurance contributions;

“engagement to which Chapter 10 applies” has the meaning given by section 61M(5);

“engagement to which this Chapter applies” has the meaning given by section 49(5);

“national insurance contributions” means contributions under Part 1 of SSCBA 1992 or Part 1 of SSCB(NI)A 1992;

“PAYE provisions” means the provisions of Part 11 or PAYE regulations;

“the relevant engagements” has the meaning given by section 50(4).

(2) References in this Chapter to payments or benefits received or receivable from a partnership or unincorporated association include payments or benefits to which a person is or may be entitled in the person’s capacity as a member of the partnership or association.

(3) For the purposes of this Chapter—

(a) anything done by or in relation to an associate of an intermediary is treated as done by or in relation to the intermediary, and

(b) a payment or other benefit provided to a member of an individual’s family or household is treated as provided to the individual.

(4) For the purposes of this Chapter, two people living together as if they were a married couple or civil partners are treated as if they were married to, or civil partners of, each other.

Part 3 — Employment income: earnings and benefits etc. treated as earnings

Chapter 1 — Earnings

Earnings

62

(1) This section explains what is meant by “earnings” in the employment income Parts.

(2) In those Parts “earnings”, in relation to an employment, means—

(a) any salary, wages or fee,

(b) any gratuity or other profit or incidental benefit of any kind obtained by the employee if it is money or money’s worth, or

(3) For the purposes of subsection (2) “money’s worth” means something that is—

(a) of direct monetary value to the employee, or

(b) capable of being converted into money or something of direct monetary value to the employee.

(4) Subsection (1) does not affect the operation of statutory provisions that provide for amounts to be treated as earnings (and see section 721(7)).

Chapter 2 — Taxable benefits: the benefits code

The benefits code

63

(1) In the employment income Parts “the benefits code” means—

this Chapter,

Chapter 3 (expenses payments),

Chapter 4 (vouchers and credit-tokens),

Chapter 5 (living accommodation),

Chapter 6 (cars, vans and related benefits),

Chapter 7 (loans), and

Chapter 10 (residual liability to charge)

(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(5) The benefits code has effect subject to section 554Z2(2).

Relationship between earnings and benefits code

64

(1) This section applies if, apart from this section, the same benefit would give rise to two amounts (“A” and “B”)—

(a) A being an amount of earnings as defined in Chapter 1 of this Part, and

(b) B being an amount to be treated as earnings under the benefits code.

(2) In such a case—

(a) A constitutes earnings as defined in Chapter 1 of this Part, and

(b) the amount (if any) by which B exceeds A is to be treated as earnings under the benefits code.

(3) This section does not apply in connection with living accommodation to which Chapter 5 of this Part applies.

(4) In that case section 109 applies to determine the relationship between that Chapter and Chapter 1 of this Part.

(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Dispensations relating to benefits within provisions not applicable to lower-paid employment

65

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

General definitions for benefits code

66

(1) In the benefits code—

(a) “employment” means a taxable employment under Part 2, and

(b) “employed”, “employee” and “employer” have corresponding meanings.

(2) Where a Chapter of the benefits code applies in relation to an employee—

(a) references in that Chapter to “the employment” are to the employment of that employee, and

(b) references in that Chapter to “the employer” are to the employer in respect of that employment.

(3) For the purposes of the benefits code an employment is a “taxable employment under Part 2” in a tax year if the earnings from the employment for that year are (or would be if there were any) general earnings to which the charging provisions of Chapter 4 or 5 of Part 2 apply.

(4) In subsection (3)—

(a) the reference to an employment includes employment as a director of a company, and

(b) “earnings” means earnings as defined in Chapter 1 of this Part.

(5) In the benefits code “lower-paid employment as a minister of religion” has the same meaning as in Part 4 (see section 290D).

Meaning of “director” and “full-time working director”

67

(1) In the benefits code “director” means—

(a) in relation to a company whose affairs are managed by a board of directors or similar body, a member of that body,

(b) in relation to a company whose affairs are managed by a single director or similar person, that director or person, and

and includes any person in accordance with whose directions or instructions the directors of the company (as defined above) are accustomed to act.

(2) For the purposes of subsection (1) a person is not to be regarded as a person in accordance with whose directions or instructions the directors of the company are accustomed to act merely because the directors act on advice given by that person in a professional capacity.

(3) In the benefits code “full-time working director” means a director who is required to devote substantially the whole of his time to the service of the company in a managerial or technical capacity.

Meaning of “material interest” in a company

68

(1) For the purposes of the benefits code a person has a material interest in a company if condition A or B is met.

(2) Condition A is that the person (with or without one or more associates) or any associate of that person (with or without one or more other such associates) is—

(a) the beneficial owner of, or

(b) able to control, directly or through the medium of other companies or by any other indirect means,

more than 5% of the ordinary share capital of the company.

(3) Condition B is that, in the case of a close company, the person (with or without one or more associates) or any associate of that person (with or without one or more other such associates), possesses or is entitled to acquire, such rights as would—

(a) in the event of the winding-up of the company, or

(b) in any other circumstances,

give an entitlement to receive more than 5% of the assets which would then be available for distribution among the participators.

(4) In this section—

“associate” has the meaning given by section 448 of CTA 2010 except that, for this purpose, “relative” in section 448(1) has the meaning given by subsection (5) below, and

“participator” has the meaning given by section 454 of CTA 2010.

(5) For the purposes of this section a person (“A”) is a relative of another (“B”) if A is—

(a) B’s spouse or civil partner,

(b) a parent, child or remoter relation in the direct line either of B or of B’s spouse or civil partner,

(d) the spouse or civil partner of a person falling within paragraph (b) or (c).

Extended meaning of “control”

69

(1) The definition of “control” in section 995 of ITA 2007 (which is applied for the purposes of this Act by section 719) is extended as follows.

(2) For the purposes of the benefits code that definition applies (with the necessary modifications) in relation to an unincorporated association as it applies in relation to a body corporate.

Chapter 3 — Taxable benefits: expenses payments

Sums in respect of expenses

70

(1) This Chapter applies to a sum paid to an employee in a tax year if the sum—

(a) is paid to the employee in respect of expenses, and

(b) is so paid by reason of the employment.

(2) This Chapter applies to a sum paid away by an employee in a tax year if the sum—

(a) was put at the employee’s disposal in respect of expenses,

(b) was so put by reason of the employment, and

(3) For the purposes of this Chapter it does not matter whether the employment is held at the time when the sum is paid or paid away so long as it is held at some point in the tax year in which the sum is paid or paid away.

(4) References in this Chapter to an employee accordingly include a prospective or former employee.

(5) This Chapter does not apply to the extent that the sum constitutes earnings from the employment by virtue of any other provision.

Meaning of paid or put at disposal by reason of the employment

71

(1) If an employer pays a sum in respect of expenses to an employee it is to be treated as paid by reason of the employment unless—

(a) the employer is an individual, and

(b) the payment is made in the normal course of the employer’s domestic, family or personal relationships.

(2) If an employer puts a sum at an employee’s disposal in respect of expenses it is to be treated as put at the employee’s disposal by reason of the employment unless—

(a) the employer is an individual, and

(b) the sum is put at the employee’s disposal in the normal course of the employer’s domestic, family or personal relationships.

Sums in respect of expenses treated as earnings

72

(1) If this Chapter applies to a sum, the sum is to be treated as earnings from the employment for the tax year in which it is paid or paid away.

(2) Subsection (1) does not prevent the making of a deduction allowed under any of the provisions listed in subsection (3).

(3) The provisions are—

section 336 (deductions for expenses: the general rule);

section 337 (travel in performance of duties);

section 338 (travel for necessary attendance);

section 340 (travel between group employments);

section 340A (travel between linked employments);

section 341 (travel at start or finish of overseas employment);

section 342 (travel between employments where duties performed abroad);

section 343 (deduction for professional membership fees);

section 344 (deduction for annual subscriptions);

section 346 (deduction for employee liabilities);

section 351 (expenses of ministers of religion);

section 353 (deductions from earnings charged on remittance).

Chapter 4 — Taxable benefits: vouchers and credit-tokens

Cash vouchers: introduction

Cash vouchers to which this Chapter applies

73

(1) This Chapter applies to a cash voucher provided for an employee by reason of the employment which is received by the employee.

(2) A cash voucher provided for an employee by the employer is to be regarded as provided by reason of the employment unless—

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