Income Tax (Trading and Other Income) Act 2005 section 72

Payroll deduction schemes: contributions to agents' expenses

Section 72 allows employers a tax deduction for expenses they pay towards the administrative costs of operating a payroll giving (payroll deduction) scheme through an approved agent.

• Employers who operate a payroll deduction scheme and pay withheld charitable donations to an approved agent may claim a trading deduction for contributions they make towards the agent's running costs.
• The deduction covers the agent's expenses already incurred or still to be incurred in carrying out its functions under the scheme.
• Where the employer calculates trade profits on the cash basis, the deduction is limited to expenses the agent has already incurred — future expenses cannot be deducted.
• The terms "approved agent" and "approved scheme" take their meaning from section 714 of the Income Tax (Earnings and Pensions) Act 2003, which requires HMRC approval of both the scheme and the agent.