Commentary on Sections Overview Overview Section 72: Payroll deduction schemes: contributions to agents’ expenses
294.This section an allows an employer a deduction for expenses incurred in operating the payroll deduction scheme. It is based on section 86A of ICTA.
295.The main rules for payroll deduction schemes are found in Part 12 of ITEPA. Under such a scheme, an employer deducts charitable donations from employees’ salaries and pays them to an agent, who distributes them to the employees’ chosen charities.
296.The agent’s administrative costs may be deducted from the donations. But many employers voluntarily pay the costs themselves so that the employees’ full donations can go to the chosen charities.
297.Normally, payments made voluntarily to meet someone else’s expenses are not made wholly and exclusively for the purposes of a trade and therefore would not be deductible. Employers might get relief for donations to charitable agencies under the Gift Aid scheme. But there are restrictions on the operation of that section and relief would not be available if the agent was not itself a charity.
298.This section gives relief for the expenses as a trading deduction.
299.Subsection (3) defines “approved scheme” and “approved agent” by reference to the definitions in section 714 of ITEPA.
300.Section 714(2) of ITEPA defines “approved scheme” as:
“a scheme which is approved (or is of a kind approved) by the Inland Revenue and under which—(a)the payer is required to pay sums withheld to a body which is an approved agent at the time of the withholding, and(b)the approved agent is required—(i)to pay sums withheld to the specified charity or charities, or(ii)in a case where the agent is itself a specified charity, to retain any sum due to itself …”
301.Section 714(3) of ITEPA defines “approved agent”:
“For the purposes of this section a body is an “approved agent” if it is approved by the Inland Revenue for the purpose of paying donations to one or more charities.”