What does section 353 of the Income Tax (Earnings and Pensions) Act 2003 cover?

Section 353 sets out the rules for claiming expense deductions against employment earnings taxed on the remittance basis. It identifies which expenses qualify, requires they meet the normal deductibility tests under sections 336 to 342, and includes a deeming rule ensuring compatibility with other deductibility provisions in United Kingdom tax law.

Which expenses qualify for deduction under section 353?

Qualifying expenses include those paid by the employee out of the relevant earnings, those paid on the employee's behalf and included in earnings, and any other expenses paid in the UK during a tax year in which the employee was UK resident. Both categories must also satisfy the normal employee expense deductibility rules.

What is the deductibility condition for remittance basis expenses under section 353?

The expenses must be of a type that would have been deductible under the normal employee expense rules in sections 336 to 342, as if the earnings had been taxed on the receipts basis in the tax year the expenses were actually incurred. The same tests applying to ordinary employment expense deductions also apply here.

How does section 353 interact with other deductibility provisions?

Various other provisions allow deductions only where expenses have been paid out of earnings. Section 353 includes a deeming rule that assumes the person paid relevant expenses out of remittance-basis earnings. This prevents a technical gap that might otherwise deny legitimate deductions because of how remittance-basis earnings are taxed.

Income Tax (Earnings and Pensions) Act 2003 section 353

Deductions from earnings charged on remittance

Section 353 sets out the rules for claiming expense deductions against employment earnings that are taxed on the remittance basis rather than the receipts basis.

Qualifying expenses include those paid by the employee out of the relevant earnings, those paid on the employee's behalf and included in earnings, and any other expenses paid in the UK in a tax year when the employee was UK resident.
The expenses are only deductible if they would have qualified under the normal employee expense rules (sections 336 to 342) had the earnings been taxed on the receipts basis in the year the expenses were incurred.
Where other deductibility provisions require expenses to have been paid by a person out of earnings, the law assumes that the person paid those expenses out of the remittance-basis earnings.
This section ensures that employees taxed on the remittance basis are not disadvantaged compared with those taxed on the receipts basis when claiming legitimate employment expense deductions.

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