BIM44605 - Specific deductions: Employee benefit trusts: general purpose EBT contributions: timing of deductions: FA03/SCH24: computing adjustments

Adjustments may be required in computing an employer’s taxable profits to:

• disallow a deduction for an employee benefit contribution to the extent that qualifying benefits or qualifying expenses are not paid out of it during the period, or within nine months of the end of the period, in which the contribution would otherwise be allowed as a deduction (FA03/SCH24/PARA1 (3)); and
• allow a deduction for a later period to the extent that qualifying benefits are paid in that later period, up to a maximum of the amounts disallowed for earlier periods for which a deduction has not already been given (FA03/SCH24/PARA1 (4)).

Disallowing deductions under PARA1 (3)

The amount of the deduction disallowed by PARA1 (3) is:

• the amount of the deduction which would otherwise be allowed for employee benefit contributions in computing an employer’s profits for the period concerned,

less

• the amount of the qualifying benefits and qualifying expenses paid out of the contributions during the period or within nine months of the end of it.

Allowing deductions for later periods under PARA1 (4)

The amount disallowed by PARA1 (3) remains available to be deducted in computing the employer’s taxable profits for later periods in which qualifying benefits are provided out of the contributions.

The amount allowed as a deduction for a later period is the lower of:

• the amount of the qualifying benefits paid out of disallowed contributions during the later period, and
• the total amounts disallowed for earlier periods by PARA1 (3) less the total amounts already allowed for subsequent periods by PARA1 (4).

An example applying PARA 1(3) and PARA 1(4) is at BIM44610.