Introduction Background Note
6.Section 346 of ITEPA enables employees to claim deductions from earnings for payments of employment-related liabilities and of insurance premiums to indemnify against such liabilities. Any deduction due is given against earnings from the employment for the year in which the payment is made. Section 555 of ITEPA makes like provision in respect of former employees but also provides for the deduction to be set against the former employee’s general income arising in the tax year in which the payment is made.
7.This section counters avoidance involving the abusive use of deductions for employment-related liabilities and is introduced in response to arrangements that involve the creation of a contrived liability through deliberate default.
8.The changes introduced by this measure were announced on 13 January 2009 by a Written Ministerial Statement tabled by the Financial Secretary to the Treasury. A Technical Note explaining who would be affected and how was published on the HM Revenue & Customs website on 12 January 2009.