Section 518 — Indemnity. Successor to s.290 of the 1961 Act.
Section 518 is in Chapter XXIII — Miscellaneous, which runs from section 499 to section 536.
The section indemnifies every person who deducts, retains or pays any tax under the Act in respect of income belonging to another person, for that deduction, retention or payment. It is a single sentence covering all three acts, and it gives the protection to the person acting under the Act rather than to the person whose income it is.
A deductor or a person retaining or paying tax on someone else's income is handling money that is not his, and would otherwise be exposed to a claim from the owner of the income; the section removes that exposure so the obligations in the Act can be performed without risk.
If you have deducted, retained or paid tax on income belonging to someone else in pursuance of the Act, the person whose income it is cannot hold you liable for having done so. The protection follows the act being done in pursuance of the Act, so it goes no further than what the Act required or authorised.
A company deducts tax from a payment due to a contractor and pays it over in pursuance of the Act. The contractor later sues the company for the shortfall, arguing that the full contract sum should have reached him. The section answers the claim outright: every person deducting, retaining or paying any tax under the Act in respect of income belonging to another person is indemnified for that deduction, retention or payment. The protection stops there, though — had the company kept the money instead of paying it over, that would not be a deduction, retention or payment made in pursuance of the Act and the indemnity would not cover it.
Not in any notice, form or return. It surfaces as a defence, when the person whose income was deducted from disputes the amount with the deductor — the section is what the deductor points to.
Every person deducting, retaining, or paying any tax in pursuance of this Act in respect of an income belonging to another person shall be indemnified for the deduction, retention, or payment thereof.
See the full 1961 to 2025 concordance.