Schedule 2: Transitionals and savings etc. Part 3: Trading income Paragraphs 22 and 23: Training courses for employees
3538.These two paragraphs ensure continuity in the training expenses tax recovery provisions in the source legislation which are rewritten in section 75. They are based on section 588 of ICTA.
3539.Paragraph 37 of Schedule 7 to ITEPA keeps sections 588(5)(a) and 589(3) and (4) of ICTA in force in relation to tax years before 2003-04. It also preserves the reference to section 589(3) and (4) of ICTA in section 588(6) of ICTA in relation to such tax years.
3540.The first paragraph ensures that the rewrite of section 588 of ICTA does not stop paragraph 37 of Schedule 7 to ITEPA from working: where section 588 has effect by virtue of paragraph 37 of Schedule 7 to ITEPA the amendments do not apply in relation to the section.
3541.The second paragraph ensures continuity in the case of determinations of an employer’s income tax liability for the tax years between the dates that ITEPA and the rewrite of section 588 of ICTA come into force. Those determinations will be made on the assumption that a deduction is allowed under section 588(3) of ICTA. Doubt might arise whether section 75 applies in such cases: section 75(1) says that the section applies if an employer’s liability has been determined on the assumption that a deduction is allowed under section 74.
3542.The effect of the transitional is that even though a deduction has been allowed under section 588(3) of ICTA, section 75 will operate if there is a later breach of section 311(4)(a) or (b) of ITEPA.
3543.If the expenditure is incurred on or after 6 April 2005, the employer’s right to a deduction will arise under section 74 and section 75 will operate if there is a later breach of section 311(4)(a) or (b) of ITEPA.
3544.Sub-paragraph (1)(c) of the second paragraph makes it clear that this transitional does not apply if an assessment has already been made before the rewritten provisions come into force.