Consider whether a provision includes elements that are affected by specific tax rules. For example FA89/S43 provides that in computing taxable profits no deduction may be made for the remuneration of directors or employees unless that remuneration is paid (as defined for PAYE purposes) during the accounting period or within nine months of the end of the accounting period. This means that if a provision includes an element in respect of employee's remuneration, that element must be disallowed to the extent that the remuneration is not 'paid' within nine months of the end of the accounting period.
For companies this only applies for accounting periods
ending on or before 31 March 1996
Interest that is not ’yearly interest' is deductible as
charged in the accounts (assuming it fulfils the ’wholly and
exclusively' test). For yearly interest, the treatment is
determined by ICTA88/S337. Only yearly interest payable in the UK
to a bank carrying on a banking business in the UK is deductible.
Otherwise interest may be a ’charge on income' and relieved
in accordance with statute (ICTA88/S338). For the meaning of
’payable in the UK' or of ’payable to a bank carrying
on business in the UK' see CTM35210.
For company’s accounting periods ending on or after 1
April 1996
The treatment will be determined by statute in every case. If
charged to current assets interest is relieved as charged against
profits in the accounts, normally when the contract, etc., is
complete, or as profit is recognised before completion. If however
the interest is capitalised as part of a fixed capital asset or
other capital project, FA96/SCH9/PARA4, permits it to be deducted
in the tax computation at the time it is charged to the fixed asset
account. The broad overall effect is to preserve the treatment of
interest charged to asset accounts under the pre-1996 rules. See
CTM53520.
There are a number of other specific provisions that determine when an expense should be deducted and which therefore override the general rule in BIM42215.
| Examples of expenditure subject to a statutory timing rule | Guidance | Effect |
| FA89/S43 | BIM47130 - BIM47145 | Allows a deduction for remuneration only at the date it is ‘paid’ for PAYE purposes, except to the extent it is ‘paid’ within 9 months of the balance sheet date. |
| ICTA88/S90
ITEPA03/S309 | BIM47200 onwards | Allows redundancy payments only at the date of payment; only applies to payments not allowable on general Case I principles; following the Cosmotron decision (CIR v Manufacturing Co Ltd. [1997] 70TC292) many more payments will be allowable on general principles. |
| FA89/S76 | BIM46015 | Applies to all payments by employers under unapproved retirement benefit schemes (including many ‘ex-gratia’ payments to retiring employees, see EIM15010 - EIM15012): disallows payments not matched by a charge on the employee: allowable payments are allowed only at the date of payment. |
| ICTA88/S87 | BIM46250 onwards | Lease premiums |
| CAA90/S68
FA92/S41 | BIM56000 onwards | Film production expenditure |
