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HMRC internal manual

Employment Income Manual

Employment income: professional remuneration: strict legal position

Where a professional in private practice holds an office, the income from that office is strictly taxable as employment income. This is so even if the duties of the office are such that they normally fall within the scope of the office holder’s profession and it is held as an incident in carrying on a private practice by the holder (see in this connection CIR v Brander and Cruickshank (46TC574)). The same applies in the case of an employment held by such an individual (but see ESM if there is any doubt in these circumstances about whether a particular engagement amounts to an employment).

However, HMRC recognised that there may be practical difficulties in treating this income as employment income. For periods prior to 6 April 2018, HMRC therefore allowed by extra-statutory concession for this employment income to be treated as ordinary professional receipts within the trading income rules and to allow any expenses admissible under those rules. This was provided specified conditions were met.

From 6 April 2018, the Enactment of Extra-Statutory Concessions Order 2018 enacted this concession and its associated conditions by amending section 6(5) ITEPA and introducing section 16C of the Income Tax (Trading and Other Income) Act 2005 (ITTOIA) and section 40B of the Corporation Tax Act 2009 (CTA 2009).

Section 6(5) now provides that employment income is not charged to tax under Part 2 of the Act if it is within the charge to tax under:

  • Part 2 of ITTOIA by virtue of section 16C of that Act, or
  • Part 3 of CTA 2009 by virtue of section 40B of that Act

Section 16C and section 40B set out conditions that, if met, mean that income from an office or employment is exempt from income tax under Part 2 of ITEPA and treated instead as a receipt of a trade.

Further guidance is provided at the following references.

Page reference Guidance
EIM03001 Practical difficulties if treated as employment income
EIM03002 Exemption from charge to income tax under Part 2 of ITEPA: conditions to be met
EIM03003 Is the engagement in a related area?
EIM03004 Other points