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Income Tax (Earnings and Pensions) Act 2003

Section 381: Taking account of other deductions

1668.This section contains the rules for calculating the amount of the earnings for the purposes of this Chapter. It derives from paragraph 1A of Schedule 12 to ICTA.

1669.All the other employment income deductions are allowed against the full amount of earnings from the employment for the tax year in question. However, the deduction is only allowed in respect of the earnings from the employment which are attributable to an eligible period.

1670.This means that in some circumstances only a part of a seafarer’s earnings for a year may be eligible for the deduction. If the deduction was computed and allowed by reference to the gross earnings for the eligible period, this would displace any other employment income deductions, with the effect that those other deductions, which were for a full year, would be allowed against the earnings for only part of the year.

1671.To prevent this, this section requires that the amount of the earnings for the eligible period is to be computed by first deducting all of the employment income deductions and any capital allowances from the gross earnings of the employment for the year. The net product of this calculation is then apportioned to find the earnings for both the eligible and non-eligible periods.

1672.Paragraph 1A of Schedule 12 to ICTA lists the deductions which are to be taken into account in determining the earnings for the purposes of the FED. However, this list is not complete. For example, it does not refer to deductions under sections 201AA or 201A of ICTA, or under sections 50 to 52 of FA 1989.

1673.This appears to be unintended. In practice, all the other employment income deductions and capital allowances are taken into account when calculating the earnings eligible for the FED. Accordingly the list has been extended to include all those which may be made under the appropriate employment income provisions. This is a minor change to the law. See Change 103 in Annex 1.

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