40.This section provides in subsection (1) that the charge to tax on employment income under Part 2 is split into a charge to tax on “general earnings” and “specific employment income”. The labels “employment income”, “general earnings” and “specific employment income” are new, and are explained in section 7.
41.Subsection (2) provides a signpost to section 9 which sets out how to work out the amount of general earnings or specific employment income that is charged to tax in a particular tax year.
42.Subsection (3) is a pointer to Chapters 4 and 5 which derive from the Cases of Schedule E. Those Chapters set out the rules relating to residence, domicile etc that apply to general earnings. Those Chapters have no application to “specific employment income”.
43.Subsection (4) provides a signpost to section 13 which in turn makes clear who is liable for tax under this Part.
44.Subsections (1) to (4) are new, although subsection (1) derives in part from paragraphs 1 and 5 of section 19(1) of ICTA.
45.Subsection (5) provides the one exception to the basic rule that employment income is charged to tax on income from employments. This Act replaces all charges to tax under Schedule E, but there is one category of income from employment that is not charged to tax under Schedule E. The employment duties of specified types of divers and diving supervisors are treated as if they constitute a trade and are charged to tax under Schedule D. Subsection (5) of this section reflects the effect of section 314(1) of ICTA in removing the income from employment of those divers and diving instructors from the scope of Schedule E.
46.This section sets out the definitions of these terms introduced in the preceding section. It is new. See Notes 2 and 3 in Annex 2.
47.Those Notes explain in full why it is necessary to distinguish between the two elements to the employment income charged in this Part. The first element is “general earnings”, which relate to “emoluments” brought into charge by paragraph 1 of section 19(1) of ICTA. The basis of assessment for “general earnings” depends on the residence, ordinary residence and domicile status of the employee. The second element, “specific employment income”, relates to the free-standing charges under Schedule E, chargeable under paragraph 5 of section 19(1) of ICTA. The basis of assessment for “specific employment income” is blind to issues of residence, ordinary residence and domicile.
48.This section provides the definition of exempt income for the purposes of the employment income Parts. It is new.