Simplification of exemptions for employee liabilities and indemnity insurance
24 March 2017
The draft guidance will be finalised and published in the Employment Income Manual (EIM) following Royal Assent of Finance Bill 2017.
Section 346 Income Taxes (Earnings and Pensions) Act (ITEPA) 2003 gives directors and employees deductions against the earnings of an office or employment for:
- amounts and connected expenses paid in respect of their liabilities related to the employment
- costs or expenses incurred in connection with a claim that they’re subject to such a liability or proceedings related to, or arising out of, a claim that they’re subject to a liability related to the employment
- so much of any premium paid under a qualifying contract of insurance as relates to indemnifying them against any such liabilities, costs or expenses
Amongst other amendments for tax year 2017 to 2018 onwards, a deduction is also available against the earnings of an office or employment where an employee incurs costs or expenses in connection with giving evidence in or for the purposes of proceedings (or some other process or an investigation) about a matter related to their employment. The relief applies even if no other action is likely to be taken against the employee as a result of the proceedings.
- ‘Giving evidence’ includes answering questions and making a statement either formally or informally.
- ‘Proceeding or other process’ includes civil, criminal, disciplinary or arbitration proceedings and any process for resolving disputes or adjudicating complaints, and the exemption includes costs or expenses relating to any proceedings or investigations likely to take place.
The draft guidance can be read in full and if you have any comments or queries on this draft guidance please contact the employment income policy team.