Deductions for work expenses (480: Chapter 7)
Find out more information on deductions for employee costs or expenses.
Overview
7.1
Sections 337 and 338
An employee’s remuneration for tax purposes is reduced by the cost of journeys:
- they have to make in the performance of the duties of the employment, or
- to a workplace they have to attend to carry out the duties of the employment, but not if the journey is ordinary commuting or private travel
Section 336
Where not covered by the exemption for paid or reimbursed expenses (see chapter 2), the employee is also entitled to a deduction for any other expenses which are incurred wholly, exclusively and necessarily in the performance of the duties of the employment, (see chapter 20 for an exception for some entertaining expenses).
7.2
No deduction is due for expenses which puts employees in a position to perform the duties of their employment, other than for the cost of travel to a temporary workplace. For example, no deduction is due for the cost of buying ordinary work clothes.
7.3
Section 36, CAA 2001
Where plant or machinery, such as a computer is necessarily provided by an employee, for use in the performance of the duties, they may be entitled to a deduction by way of capital allowances for depreciation related to its business use. No deduction is available if the employee’s employer would have provided the plant or machinery necessary to do the job, but the employee chooses to provide it instead.
You can claim Annual Investment Allowance (AIA) on any purchase of equipment up to an annual amount of:
- £50,000 in 2009 to 2010
- £100,000 in 2010 to 2011 and 2011 to 2012
- £25,000 in 2012 to 2013
If the total is £50,000 or less, you can claim 100% of the total amount as AIA.
You can claim Writing Down Allowance on any balance of capital expenditure on plant and machinery that you have not been able to claim the Annual Investment Allowance for, and on residual balances of expenditure that you have carried forward from the previous accounting period. The rates are 20% for 2011 to 2012 and 18% for 2012 to 2013.
Since 2002 to 2003, employees and office holders have not been able to get capital allowances for a car, motorcycle or cycle.
7.4
Sections 359(2) and (3) ICTA 1988
If an employee gets a loan, other than an overdraft, to buy plant or machinery for which they are entitled to capital allowances (paragraphs 7.2 and 7.3 above), they can get relief for interest paid on the loan. The interest has to be paid within 3 years after the end of the tax year in which the debt was incurred. The relief due will be restricted to take account of any private use of the plant or machinery.
Subscriptions to professional societies
7.5
Sections 343 and 344
An employee may get a deduction for annual subscriptions paid to certain approved professional bodies or learned societies, where the body’s activities are relevant to the duties of the employment.
A deduction may also be due for certain statutory fees paid to such bodies by an employee as a condition of carrying on the employment (for example, as a registered veterinary surgeon or a practising solicitor). You can find out more information in the list of approved bodies for tax relief.
Deduction for expenditure on special security measures
Section 377
7.6
Employees who face a special threat to their personal physical security because of their work, are entitled to a deduction equal to the tax charge which may arise for the provision of, or payment for, security measures by their employer, or by somebody acting on the employer’s behalf. A deduction is due if all the following conditions are satisfied:
- there must be a special threat to the employee’s personal physical security (for example, from terrorists or other groups who resort to violence)
- the threat must arise wholly or mainly by virtue of the particular office or employment concerned
- the person providing the benefits or reimbursing the expense must have the meeting of that threat as the sole object in bearing the cost
- in the case of a security service, the benefit resulting to the employee must consist wholly or mainly of an improvement in the employee’s personal physical security
7.7
Where an employee is provided with a security asset the full amount of the taxable benefit can be deducted if the provider intends the asset to be used solely to improve personal physical security. If the provider intends the asset to be used only partly to improve personal physical security the employee is entitled to a deduction for an appropriate proportion of the resulting benefit.
7.8
No deduction is due for:
- security expenditure which an employee incurs out of their own pocket and which is not reimbursed by or on behalf of the employer
-
any benefit arising from the provision of:
- cars, ships or aircraft
- a dwelling or ground connected to a dwelling
- living accommodation
There is, however, a separate exemption for living accommodation which is provided as part of special security arrangements – see chapter 21 paragraph 21.2(c).
Employee liabilities and indemnities
Section 346
7.9
Employees are allowed a deduction for costs or expenses incurred as a result of a claim that they’re subject to liabilities imposed for their actual or alleged acts or omissions in their capacities as employees. They’re also allowed a deduction for costs or expenses incurred in connection with giving evidence in criminal or civil proceedings about a matter related to their employment.
7.10
A deduction is also due for the premiums paid on an insurance policy taken out solely to cover the costs or expenses referred to in paragraph 7.9 above.
7.11
In both cases, no deduction is allowed for a payment made in relation to arrangements for which tax avoidance is one of the main purposes.