BIM44635 - Specific deductions: Employee benefit trusts: general purpose EBT contributions: timing of deductions: FA03/SCH24: interaction with FA89/S43

FA89/S43 determines when a deduction for employees’ remuneration is to be given in computing the employer’s profits taxable under Schedule D. General guidance on FA89/S43 is at BIM47130.

Accounting periods ending on or after 27 November 2002

Following amendments made by FA03/SCH24 and by ITEPA03, the deductions in an employer’s accounts which may be affected by FA89/S43 are those ’in respect of employees’ remuneration. This includes an amount for which a provision is made in the accounts with a view to its becoming employees’ remuneration.

FA89/S43 defers to timing of the deduction for employees’ remuneration which remains unpaid nine months after the end of the period of the accounts in which it is deducted in accordance with generally accepted accounting practice.

If the remuneration for which a deduction has been disallowed by FA89/S43 is paid in a later period, a deduction is given in computing the employer’s taxable profits for the later period.

The interaction of FA89/S43 and FA03/SCH24 may need to be considered if:

• a provision for employees’ remuneration in a company’s accounts for a period ending on or after 27 November 2002 has been disallowed by FA89/S43 rather than FA03/SCH24 because there was no intention at that stage that the remuneration would be paid through an EBT or other third party, rather than by the employer direct; and
• the original intentions change and the employees eventually receive the remuneration in a later period out of a contribution made by the employer to an EBT or other third party intermediary on or after 27 November 2002.

In these circumstances the amount disallowed for the earlier period should be treated as having been disallowed instead under FA03/SCH24/PARA1 (3).

The amount disallowed will then be available to be allowed as a deduction under FA03/SCH24/PARA1 (4) for the period in which remuneration in the form of qualifying benefits is provided by the EBT or other third party out of the employer’s contribution.