Annex 1: Minor Changes in the Law Change 14: Trading income etc: clarification of position of employees seconded to charities: sections 70 and 1235 and Schedule 1
This change provides that a company which seconds an employee to a charity or educational establishment is entitled to a deduction in calculating its profits, irrespective of the duties undertaken by the employee while on secondment.
The change brings the income tax and corporation tax codes back into line. It also applies to management expenses.
Section 86 of ICTA gives relief for companies which second employees to charities or educational establishments. It does this by providing that, notwithstanding anything in the general rules on deductions not allowable in section 74 or 75 of ICTA, the cost of the seconded employee:
	shall continue to be deductible in the manner and to the like extent as if, during the time that his services are so made available … they continued to be available for the purposes of the employer’s trade …
So if the costs of the employee would not be allowed under the normal rules – for example because the employee is employed on a capital project – the employer is not entitled to any deduction under section 86 of ICTA.
In practice, the costs of the secondment are allowed whatever the nature of the work carried out by the employee during the secondment. So if, for example, an employee is seconded to a medical charity to help build a hospice, the company is allowed to deduct the cost of employing the seconded person. This change gives statutory effect to that practice.
This change applies also to the corresponding rule for expenses of insurance companies in section 76ZB of ICTA (inserted by Schedule 1 to this Act).
This change is in taxpayers’ favour in principle. But it is expected to have no practical effect as it is in line with generally accepted practice.