Section 1170: “Staffing costs”
2983.This section gives the meaning of staffing costs. It is based on paragraph 5 of Schedule 22 to FA 2001. That paragraph uses the term “employee costs”, but in rewriting the source legislation it was felt that the term “staffing costs”, which is the term used for the equivalent purpose in Part 13 of the Act, was more appropriate.
2984.Paragraph 5(1)(a) of Schedule 22 to FA 2001 refers to “emoluments paid by the company … including all salaries, wages, perquisites and profits whatsoever other than benefits in kind”. This is based on the definition of emoluments that section 131 of ICTA applied for Schedule E before that Schedule was rewritten by ITEPA.
2985.ITEPA amended paragraph 5 of Schedule 20 to FA 2000 so that it referred to earnings which constitute employment income. In doing so it inadvertently expanded the definition to include benefits in kind. This change was reversed by paragraph 7 of Schedule 17 to FA 2004, which reinstated the original wording.
2986.In rewriting Schedule 22 to FA 2001 it was decided that the language and format of the definition should be adapted so that the definition applies more clearly from the position of the company making the payment rather than the employee receiving it. Hence the reference to money earnings and reimbursed expenses.
2987.Subsection (2) rewrites the reference to salaries and wages by reference to money earnings. Subsection (3) rewrites the reference to perquisites and profits by reference to reimbursed expenses. See Change 79 in Annex 1.
2988.Paragraph 5(1)(c) of Schedule 22 to FA 2001 refers to “contributions paid by the company to any pension fund (within the meaning of section 231A(4) of [ICTA])”. Section 231A of ICTA was repealed by F(No 2)A 1997 with effect for distributions made on or after 6 April 1999. But a consequential amendment was not made to paragraph 5 of Schedule 22 so as to set out in full the definition of “pension fund”.
2989.The parallel definition in paragraph 5(1)(c) of Schedule 20 to FA 2000 also used to refer to section 231A(4) of ICTA. It was amended by paragraph 3 of Schedule 15 to FA 2002. The wording of the definition is the same but it is now free-standing. Subsection (6) provides a freestanding definition of “pension fund” that reflects the definition used in paragraph 5(1A) of Schedule 20 to FA 2000.