HMRC have published the Summary of Responses to Extra Statutory Concessions – Eighth Technical Consultation on Draft Legislation, which addressed four extra-statutory concessions (ESC) and ran until 9 December 2017.

The proposed legislation has been amended following the responses and was laid before parliament on 15 January 2018 with the intent that it come into force from 6 April 2018 (as The Enactment of Extra-Statutory Concessions Order 2018).

ESC A37 – Directors Fees

EIM03002 – Professional Remuneration

A director is an office holder and, as such, where remunerated receives employment income (under PAYE) by the strict legislation. ESC A37 permits the income to instead be treated as trading income where the director is a partnership or company, or the second company can appoint a director who is obliged to hand over their fee to the company.

In addition, the new legislation will also cover EIM03002, which permits professional practitioners to treat incidental income from an office or employment as part of their professional income for tax (but not National Insurance (NI)) purposes.

Respondents noted that the draft legislation used the word “insubstantial”, compared with “small” in the ESC, to describe the amount of remuneration from offices as a proportion of turnover. The term “insubstantial” is to be defined in guidance and is consistent with the wording in NI regulations.

Respondents also thought the legislation should define how the paying company should be notified that PAYE should not be applied, but HMRC take the view this is better included in guidance and will so do.

The legislation does not apply to group arrangements as there is potential for the would-be director to have influence over his appointment.

EIM01120 and BIM40475 – Financial Loss Allowance

EIM61030 – Payment from Medical Committees to Members

Financial Loss Allowance (FLA) can be paid to members of various public bodies as recompense for loss of income while undertaking public duties. EIM01120 treats this as non-taxable for employees so long as it does no more than replace lost salary, whereas BIM40475 applies to self employed individuals, for whom FLA is treated as a taxable receipt of the business.

Local Medical Committees make similar payments to GPs who sit thereon. If these are made to the individual, EIM01120 applies, if to their practice the payments are trading income.

Again, one piece of legislation has been drafted to cover all these circumstances.

The draft legislation referred to a “relevant authority”; following comments on the consultation, the definition has been broadened to include cases where a company is carrying out the functions of a relevant authority.

HMRC take the view that FLA are compensatory in nature and, as such, are not subject to Class 1 NIC. For this reason, no specific NIC disregard is required in the legislation.


Employers: Essential know-how

Directors: Essential know-how

Four more concessions to be legislated

HMRC: Extra Statutory Concessions – Eighth Technical Consultation on Draft Legislation: Summary of Responses

The Enactment of Extra-Statutory Concessions Order