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HMRC internal manual

Employment Income Manual

Employment income: retraining expenses paid by employer: withdrawal of exemption: power to make assessments

Section 312(2) and (3) ITEPA 2003

If an Inspector learns that one of the three withdrawal events listed in EIM05030 has occurred, he or she may take the action necessary to withdraw the exemption and to charge any tax which becomes due as a result of that withdrawal. The Inspector may:

  • require the employee to complete a self-assessment return, or
  • open an enquiry into a return that has already been made (if the enquiry time limit has not expired), or
  • if a self-assessment has already become final, the Inspector may make a further assessment under Section 29 TMA 1970. The time limit for making the further assessment is six years from the end of the year of assessment in which the withdrawal event occurred.

Liability may arise on the employee as follows:

  • amounts reimbursed by the employer, or paid to discharge a debt of the employee, are taxable as earnings within Section 62 ITEPA 2003 (see EIM00520 onwards)
  • if the course was paid for by the use of vouchers, or a credit token, the amount paid by the employer is treated as earnings by Section 87 or Section 94 ITEPA 2003 (see EIM16120)
  • for employees (other than those in lower paid employment for 2015/16 and earlier), any expenses payments or benefits not taxed under the previous headings will be treated as earnings by Section 72 and Section 203 (see EIM20001 onwards).

Note that the power to make assessments, described above, does not replace the Inland Revenue’s normal power to recover PAYE tax from the employer if the conditions for obtaining exemption were not satisfied at the time when the payments were made. Examples of this would be where part of the course was recreational.