EIM02503 | Employment income: directors’ fees received by partnerships: exemption from charge to Income Tax under Part 2 of ITEPA: process

As shown at EIM02500, directors’ fees paid to a member of a partnership may be exempt from charge to Income Tax under Part 2 of ITEPA and charged instead as receipts of the partnership. EIM02501 provides details of the conditions that must be met before this treatment of the directors’ fees can be allowed.

Where a request for this treatment is received, the application should be dealt with by the team responsible for examining the partnership accounts.

Where the conditions are satisfied, the Inspector should instruct the processing office to issue an ‘NT’ coding for the following income tax year. The current year’s coding should not be amended. The directors’ fees paid in full as a result of this ‘NT’ coding will be included in the Self Assessment as trading income. The coding record for the following year should be noted for issue of an ‘NT’ coding at the appropriate time.