Income Tax (Earnings and Pensions) Act 2003 section 558

Meaning of "deductible payment"

Section 558 defines which types of payments made by or on behalf of a former employee qualify as "deductible payments" for the purposes of obtaining tax relief under this Part of the Act.

• Payments settling liabilities arising from a former employment, and the legal or professional costs of defending claims related to that employment, are deductible payments.
• Costs of giving evidence or being involved in proceedings or investigations connected with the former employment also qualify, even where the former employee is not a party.
• Insurance premiums paid under a qualifying insurance contract are deductible, but only to the extent the premium covers indemnity against the types of liabilities and costs described above.
• No payment qualifies as deductible if it would have been unlawful for the former employer to have insured against the liability or costs in question.