Employee liabilities and indemnity insurance

Produced by Tolley in association with Paul Tew
Employment Tax
Guidance

Employee liabilities and indemnity insurance

Produced by Tolley in association with Paul Tew
Employment Tax
Guidance
imgtext

Introduction

Employers may meet the liabilities of their employees when they arise as a consequence of their employment duties, particularly those involving legal proceedings. To cover these liabilities, an employer will often take out an insurance policy.

Employees’ liabilities

Legal proceedings can be instigated against employees or directors either by other employees or by third parties. Often, the legal costs and any resulting liabilities will be met by an employer. An employer may choose to purchase insurance to meet all such costs.

If an employer meets the liabilities of an employee or purchases insurance on their behalf, then, typically, a tax charge will arise under ITEPA 2003, s 62 (see the Contractual and pecuniary liabilities guidance note).

However, in some circumstances, there may not be a charge to tax.

Relief for the costs of liabilities and insurance costs

ITEPA 2003, ss 346–347 provide tax relief for the costs of liabilities and insurance costs whether incurred by an employer or by an employee. A deduction can be claimed in relation to:

  1. the liabilities

Continue reading the full document
To gain access to additional expert tax guidance, workflow tools, generative tax AI, and tax research, register for a free trial of Tolley+™
Paul Tew
Paul Tew linkedinicon

Writer and advisor at Paywatch


Paul Tew is a freelance adviser, primarily in the areas of pay, personal taxation and remuneration planning. A frequent contributor to technical journals on pay and benefits issues, having written for the "In Business" section of the Times. Paul continues to supply articles for various recognised professional publications including Pay and Benefits magazine, Taxation magazine and Company's Secretary's Review. Paul also has had several loose leaf and bound books published on a variety of subject matter including PAYE, NIC, Sickness and Maternity Pay.Paul has written and presented training courses as well as headed up payroll and employment help desks and acted as an assessor for recognised Payroll/HR qualifications. Paul previously worked in the healthcare and oil sectors managing Pay and benefit services, so has many years of experience in dealing with PAYE and employment compliance issues across a broad range of industries and organisations.

Powered by Tolley+
  • 22 Nov 2022 07:06

Popular Articles

Class 4 national insurance contributions

Class 4 national insurance contributionsWhat is Class 4 NIC?Class 2 and Class 4 national insurance contributions (NIC) are paid by self-employed individuals and partners in a partnership on their profits arising within the UK. This guidance note considers Class 4 contributions. For Class 2

14 Jul 2020 11:13 | Produced by Tolley Read more Read more

Double tax relief

Double tax reliefWhen income arises in a foreign country to a UK resident company and that income is taxable in that foreign country, the UK may give the company relief for the foreign tax by crediting the foreign tax against the UK tax charged on that income. This might include withholding tax on

14 Jul 2020 11:31 | Produced by Tolley Read more Read more

FRS 102 ― tax presentation and disclosures

FRS 102 ― tax presentation and disclosuresPresentation of tax under FRS 102An entity must present changes in a current tax liability (or asset) and changes in a deferred tax liability (or asset) as a tax expense (or income) unless the item creating the current or deferred tax amount is recognised in

14 Jul 2020 11:46 | Produced by Tolley in association with Malcolm Greenbaum Read more Read more