Income Tax (Trading and Other Income) Act 2005 section 866

Employee benefit contributions: non-trades and non-property businesses

Section 866 restricts the tax deduction available for employee benefit contributions where the person's income is not from a trade, profession, vocation or property business, and sets out the conditions under which such deductions may be allowed.

• Deductions for employee benefit contributions are only allowed where qualifying benefits are provided, or qualifying expenses paid, during the period or within 9 months of its end, and no deduction is available for any period of account starting more than 5 years after the period in which the contributions were made.
• Where qualifying benefits give rise to both an employment income tax charge and a National Insurance contributions charge, the deduction is only permitted if those tax charges are paid within 12 months of the end of the period of account in which the deduction would otherwise have been allowable, and are not subsequently repaid.
• Where a deduction for employees' remuneration leads to employee benefit contributions being made, the deduction is treated as being for employee benefit contributions rather than for remuneration, ensuring the restrictive rules of this section apply rather than other provisions such as section 865.
• The section does not apply to deductions for consideration given for goods or services in a trade or profession, contributions to registered pension schemes or qualifying overseas pension schemes, or contributions to accident benefit schemes.