Income Tax (Earnings and Pensions) Act 2003 section 361

Scope of this Chapter: cost of benefits deductible as if paid by employee

Section 361 sets out the general conditions under which an employee may claim a deduction from earnings when those earnings include a taxable benefit in kind.

• A deduction is available where a person's earnings include an amount treated as earnings under the benefits code — specifically benefits relating to vouchers and credit-tokens, living accommodation, or residual taxable benefits
• The deduction is only permitted if the cost of the benefit would have been deductible had the employee personally incurred and paid for it
• This section acts as a gateway provision — it establishes the general principle, while the detailed rules for specific deductions appear in subsequent sections of the chapter
• The effect is to ensure that employees taxed on a benefit in kind are not disadvantaged compared to employees who pay for the same item out of their own pocket and claim a deduction

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