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HMRC internal manual

Employment Income Manual

Deductions: directors’ and officers’ liabilities: relief due

Sections 346 to 347 and Section 555 ITEPA 2003; Section 67 Finance 2009

Section 346 ITEPA 2003 allows for:

  • deductions equal to and so offsetting the charges outlined at EIM30501 in respect of qualifying liabilities (see EIM30511) and
  • similar deductions for employees who bear all or part of their qualifying liabilities or pay for or towards their own indemnity insurance.

Deductions under Section 346 are available only against earnings of the office or employment concerned.

No deduction is allowed for a payment that would otherwise meet the conditions of section 346 if it is made in pursuance of arrangements the main purpose, or one of the main purposes of which, is the avoidance of tax.

However, Section 347(2) ITEPA 2003 allows a similar relief where the deduction arises after the termination of the office and the conditions in Section 555 ITEPA 2003 are satisfied.