346Deduction for employee liabilities [F1and expenses] U.K.
(1)A deduction from earnings from an employment is allowed for any or all of the following—
A. Payment in or towards the discharge of a liability related to the employment.
B. Payment of any costs or expenses incurred in connection with—
(a)a claim that the employee is subject to a liability related to the employment, or
(b)proceedings relating to or arising out of a claim that the employee is subject to a liability related to the employment.
[F2BA. Payment of any costs or expenses not falling within paragraph B which are incurred in connection with the employee giving evidence about matters related to the employment in, or for the purposes of—
(a)a proceeding or other process (whether or not involving the employee), or
(b)an investigation (whether or not likely to lead to any proceeding or other process involving the employee).
BB. Payment of any costs or expenses not falling within paragraph B or BA which are incurred in connection with a proceeding or other process, or an investigation, in which—
(a)acts of the employee related to the employment, or
(b)any other matters related to the employment,
are being or are likely to be considered.]
C. Payment of a premium under a qualifying insurance contract, but only to the extent that the premium relates to—
(a)provision in the contract for the employee to be indemnified against a payment falling within paragraph A, or
(b)provision in the contract for the payment of any costs or expenses falling within paragraph B [F3, BA or BB] .
(2)But a deduction is not allowed for a payment which falls within paragraph A [F4B, BA or BB] if it would be unlawful for the employer to enter into a contract of insurance in respect of the liability, or costs or expenses, in question.
[F5(2A)Nor is a deduction allowed for a payment which falls within [F6any of paragraphs A to C] if the payment is made in pursuance of arrangements the main purpose, or one of the main purposes, of which is the avoidance of tax.]
(3)In this Chapter—
(a)“”, in relation to a qualifying insurance contract, means an amount payable to the insurer under the contract, and
(b)where a qualifying insurance contract relates to more than one person, employment or risk, the part of the premium to be treated as relating to each of them is to be determined by apportionment on a just and reasonable basis.
[F7(4)In this section and section 349—
(a)“acts” includes failures to act and acts are “related to the employment” if the employee was acting—
(i)in the employee's capacity as holder of the employment, or
(ii)in any other capacity in which the employee was acting in the performance of the duties of the employment,
(b)“giving evidence” includes making a formal or informal statement or answering questions,
(c)“proceeding or other process” includes any civil, criminal or arbitration proceedings, any disciplinary or regulatory proceedings of any kind and any process operated for resolving disputes or adjudicating on complaints, and
(d)references to a proceeding or other process or an investigation include a reference to a proceeding or other process or an investigation that is likely to take place.]
Textual Amendments
F1Words in s. 346 heading inserted (with effect in accordance with s. 4(8) of the amending Act) by Finance (No. 2) Act 2017 (c. 32), s. 4(2)(a)
F2Words in s. 346(1) inserted (with effect in accordance with s. 4(8) of the amending Act) by Finance (No. 2) Act 2017 (c. 32), s. 4(2)(b)
F3Words in s. 346(1) inserted (with effect in accordance with s. 4(8) of the amending Act) by Finance (No. 2) Act 2017 (c. 32), s. 4(2)(c)
F4Words in s. 346(2) substituted (with effect in accordance with s. 4(8) of the amending Act) by Finance (No. 2) Act 2017 (c. 32), s. 4(2)(d)
F5S. 346(2A) inserted (with effect in accordance with s. 67(4) of the amending Act) by Finance Act 2009 (c. 10), s. 67(2)
F6Words in s. 346(2A) substituted (with effect in accordance with s. 4(8) of the amending Act) by Finance (No. 2) Act 2017 (c. 32), s. 4(2)(e)
F7S. 346(4) inserted (with effect in accordance with s. 4(8) of the amending Act) by Finance (No. 2) Act 2017 (c. 32), s. 4(2)(f)