Commentary on Sections Example 3 Ne = £5,000; Da = 183; De = 183; Smg = 0 Section 328: The income from which deductions may be made
1399.This section is the first of four which sets out a general proposition relating to deductions from earnings. It deals with the income from which deductions may be made.
1400.The most important single source for this section is section 198(1) of ICTA, which includes the proposition that an amount paid “out of the emoluments of the office or employment … may be deducted from the emoluments to be assessed”. This section also draws on a considerable number of other passages in Part 5 of ICTA and in section 50 of FA 1989.
1401.Subsection (1) sets out the general rule that deductions under this Part are allowed from any earnings from the employment in question, but not from earnings from any other employment.
1402.An example of how this rule operates in practice is given in Inland Revenue guidance in SE 31658:
An individual is employed as a teacher and separately employed as coach to a local youth football team. As coach she is paid £100 a year but she incurs expenses of £1,000 a year in travelling to away matches. She pays the expenses herself and is not reimbursed by her employer.
She is only allowed a deduction of £100 for her travelling expenses under section 198(1) of ICTA. She cannot claim a loss for the remaining £900 and nor can she deduct that amount from her teaching income.
1403.The general rule is subject to a number of qualifications. These are dealt with in the rest of this section.
1404.Subsection (2) deals with one case where the general rule is not wide enough. Expenses of a minister of religion (see section 351) are allowed from earnings from any employment as a minister of a religious denomination.
1405.Subsections (3) to (5) deal with cases where the general rule is too wide: for example there are some cases where the deductions are allowed only from earnings with particular characteristics – either relating to the source of the earnings or to the manner in which the earnings are charged to tax.
1406.Subsection (3) provides that deductions under section 368 are only allowed from earnings payable out of the public revenue.
1407.Subsections (4) and (5) deal with “deductions limited to specified earnings”: for, in the cases of some provisions, deductions are allowed from earnings from the employment which qualify as taxable earnings under certain of the charging provisions of Chapters 4 and 5 of Part 2, but not from other earnings from the employment.