BIM44585 - Specific deductions: Employee benefit trusts: general purpose EBT contributions: timing of deductions: FA03/SCH24: what it applies to

FA03/SCH24 applies to deductions which would otherwise be allowed in computing an employer’s taxable profits for a period ending on or after 27 November 2002, in respect of ‘employee benefit contributions’ made by employers on or after 27 November 2002.

For this purpose computing taxable profits includes profits taxable under Schedule D, Schedule A and profits of investment and insurance companies.

Deductions which would otherwise be allowed

In computing an employers’ profits taxable under Schedule D Case I or II for a period ending on or after 27 November 2002, deductions would otherwise (apart from FA03/SCH24) be allowable for employee benefit contributions which are:

• wholly and exclusively for the purposes of the employer’s trade, and
• revenue (not capital) expenditure, and
• correctly deductible for that period in accordance with generally accepted accounting practice.

Employee benefit contributions

’Employee benefit contributions’ are defined widely as payments by an employer to a third party who is required or entitled to use them to provide benefits to employees under a trust, scheme or other arrangement.

This definition covers an employer’s contributions to an Employee Benefit Trust from which its employees may benefit. It also includes employers’ payments to other kinds of intermediaries who may be required, or may have discretion, to use them to provide benefits to employees of the employer.

What FA03/SCH24 does not apply to

FA03/SCH24 does not apply to employers’ contributions to EBTs which are:

• deductible in computing profits for periods ending before 27 November 2002 (even if the contribution is not made until after 27 November 2002), or
• paid by the employer to the trustees before 27 November 2002, or
• contributions to retirement benefit schemes or approved personal pension schemes, or
• contributions to trusts set up to provide benefits under accident benefit schemes, or
• contributions to most trusts set up to provide employees with shares in conjunction with employee share schemes.