Income Tax (Trading and Other Income) Act 2005 section 163

Deduction for deemed employment payment

Section 163 deals with the trading deduction available to an intermediary (such as a personal service company) when it is required to account for a deemed employment payment under the IR35 rules.

• Where an intermediary is treated as making a deemed employment payment under the IR35 rules, it may deduct that payment and related employer's National Insurance contributions when calculating its trading profits.
• The deduction is given in the period of account in which the deemed employment payment is treated as made — typically the end of the tax year, or earlier if certain conditions apply.
• No deduction for the deemed employment payment or associated employer's National Insurance contributions is allowed other than under this section, preventing any double deduction.
• The terms "deemed employment payment" and "intermediary" take their meaning from the employment income legislation in Chapter 8 of Part 2 of ITEPA 2003.