Income Tax (Earnings and Pensions) Act 2003 section 365

Deductions where certain employment-related benefits provided

Section 365 allows employees to claim a deduction from their earnings where they have been taxed on a residual (non-specific) benefit in kind and would have been entitled to a tax deduction had they paid for that benefit themselves.

• Where an employee's taxable earnings include an amount arising from a non-specific benefit in kind (one falling under the residual benefits charge), a deduction may be available against that amount
• The cost of the benefit must have been determined under the standard cost rules (section 204) or the rules for transferred used or depreciated assets (section 206)
• A deduction is only given if the employee would have qualified for a deduction under the general rules for deductions from earnings or the travel expense rules, had they personally incurred and paid the cost of the benefit
• The deduction is equal to the amount that would have been deductible had the employee paid for the benefit themselves — it cannot exceed that amount