Annex 1: Minor changes in the law made by the Act: Change 17: Retraining courses: deduction no longer dependent on employee’s exemption: section 74
This change removes the link in the source legislation between the employee’s exemption and the employer’s entitlement to a deduction.
Section 588(3)(b) of ICTA permits a deduction in calculating the employer’s trade profits when:
“by virtue of section 311 of ITEPA 2003, no liability to income tax arises in respect of the payment or reimbursement [of retraining course expenditure].”
The requirement for the deduction to be allowed in section 74(1) is that the “relevant conditions” in section 311 of ITEPA are met. “Relevant conditions” is defined in section 74(2) which cross-refers to the detail of the conditions in section 311of ICTA. That does not include the employee’s exemption from tax under that provision.
The effect is that the employer’s entitlement to a deduction ceases to be dependent, in part, on the employee’s exemption.
This change is in taxpayers' favour in principle and may benefit some in practice. But the numbers affected and the amounts involved are likely to be small.