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HMRC internal manual

Employment Income Manual

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The general rule for employees’ expenses: deductions not to exceed earnings

Section 329 ITEPA 2003

A deduction under the general rule for employees’ expenses in Section 336 ITEPA 2003 can only be made where an actual expense has been incurred and paid.

Even where an expense has been paid that meets the conditions for a deduction under the general rule for employees’ expenses, the amount of the deduction is limited to the amount of the earnings from which it is to be deducted (see Section 329). It is not possible for Section 336 to create an allowable loss that could be relieved under Section 128 ITA 2007..

Similarly it is not possible for any surplus expenses to be deducted from any other income, including income from other employments (see Section 328(1)).

The effect of this rule is illustrated by the example EIM31658.

There is further guidance on the limited circumstances in which Employment Income losses can be generated at EIM32866.