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Example

Ms G provides engineering services through her personal service company, G services Ltd, to a car manufacturer for 18 months, under a relevant engagement. She is a director of G Services Ltd.

Ms G has to provide her services at the client鈥檚 premises and travels from her home each day by train. Her company buys a season ticket for her costing 拢1,000 in respect of her travel that attracts a full deduction under Section 338 ITEPA 2003.

The amount of 拢1,000 is chargeable to tax as employment income and Ms G is permitted a deduction under Section 338 ITEPA 2003 of 拢1,000 in assessing those emoluments/earnings.

In working out the deemed payment, Ms G gets a deduction at Step Three for the full amount of 拢1,000. These are expenses met by the intermediary for which she could have claimed a deduction against her earnings under the normal rules if she had been employed by the client and had met those expenses out of those earnings.

Although the amount of 拢1,000 is chargeable to tax as employment income, Ms G will not get a further deduction at Step Seven because it represents an item in respect of which a deduction has been made at Step Three.