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Income Tax (Earnings and Pensions) Act 2003

Section 334: Effect of reimbursement etc.

1437.This section contains provisions dealing with the effect of reimbursement.

1438.Under the source legislation, a reimbursed amount is dealt with for income tax purposes in either of two ways:

  • if the reimbursed amount constitutes part of the earnings from the employment, the deduction is allowed in full; or

  • if the reimbursed amount does not constitute part of the earnings from the employment, the deduction of the expense is not allowed to the extent that reimbursement is made. The speeches of Lord Guest and Lord Pearce in Pook (HM Inspector of Taxes) v Owen (1969) 45 TC 571 envisage that a reimbursed amount may be dealt with in this way.

1439.Against this background, this section has been included in this Act with the object of making explicit provision for cases where an amount is reimbursed. This section is not derived directly from the source legislation, but it reflects Inland Revenue practice in cases where amounts deductible for income tax purposes are reimbursed. See Note 36(B) in Annex 2.

1440.This section also includes wording to ensure that the provisions of this Chapter apply where a payment is made to the employee in respect of the expenses in question, and that payment is included in the employee’s earnings. This wording guards against the argument that, in such a case, it is the person making the payment to the employee who pays the amount in question, and not the employee.

1441.Subsection (3) provides that this section does not apply to expenses allowed under section 351 (expenses of ministers of religion).

1442.Subsection (4) provides that this section is disregarded for the purposes of the deductibility provisions (as defined in section 332).

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