How does Capital Allowances Act 2001 section 20 affect North Sea divers and diving supervisors?

Section 20 excludes North Sea divers and diving supervisors from the definition of employment for plant and machinery allowance purposes. Because their duties are treated as a trade under section 15 of ITTOIA 2005, they claim capital allowances through the normal trading income rules instead, avoiding any overlap or duplication.

What is the effect of section 20 on remittance basis earnings from an employment or office?

Section 20 provides that where earnings are chargeable overseas earnings or foreign earnings taxed on the remittance basis under ITEPA 2003, Part 2 of the Capital Allowances Act treats the relevant overseas duties as if they did not belong to that employment or office, effectively ring-fencing them for capital allowances purposes.

Does the ring-fencing under section 20 apply only to remittance basis earnings?

No. The ring-fencing applies both to the remittance basis earnings themselves and to any other taxable earnings from the same employment or office. This ensures capital allowances are calculated correctly where an employment has a mixture of UK-taxable and remittance basis earnings, preventing the two from being conflated.

How are capital allowances calculated when an employee has both UK and overseas remittance basis duties?

Capital allowances relating to plant or machinery used in performing overseas remittance basis duties are calculated on a stand-alone basis rather than being pooled with those relating to UK duties. Each set of earnings is dealt with separately, as though the overseas duties belonged to a different employment or office.

Capital Allowances Act 2001 section 20

Employments and offices

Section 20 clarifies how plant and machinery allowances interact with certain employments and offices, particularly where duties are treated as a trade or where earnings have a foreign element taxed on the remittance basis.

North Sea divers and diving supervisors whose duties are treated as a trade are excluded from the definition of "employment" for plant and machinery allowance purposes, because they claim allowances through the trading rules instead.
Where earnings from an employment or office are chargeable overseas earnings or foreign earnings taxed on the remittance basis under ITEPA 2003, special rules apply.
In those remittance basis cases, Part 2 of the Capital Allowances Act treats the relevant duties as if they were performed outside the employment or office, effectively ring-fencing them for capital allowances purposes.
This ring-fencing applies both to the remittance basis earnings themselves and to any other taxable earnings from the same employment or office.

Access full legislation.And much more.

By becoming a member, your team gets full access to Tax World research tools and source-backed tax resources.

Become a member