BIM47135 - Measuring the profits (specific rules and practices) - receipts and deductions: specific deductions - staffing costs: relevant & potential emoluments
‘Relevant emoluments' and ‘potential emoluments' are defined in FA89/S43 (10) and (11) respectively. They are intended to encompass items an employer might claim in respect of emoluments, and which would be properly deductible in computing profits on normal accounting principles, that is:
- Emoluments allocated to particular offices or employments.
- Emoluments allocated, not to a particular office or employment, but generally in respect of all or a particular group of offices or employments. An example of this is a global sum to be paid as a bonus to all, or some class of, employees but the precise allocation of which to individual employees had not, at the accounting date, been decided.
- Payments made by an employer to a third party to enable that third party to make payments to, or provide benefits for, employees which will constitute emoluments in the employees' hands at some future date, perhaps, on the occasion of the happening of some contingency.
In this context payments made by a company to the trustees of an employee benefit trust to provide benefits in the form of cash or shares to employees of the company will often not constitute potential emoluments. But any case in which it appears that such a trust is being used by a company largely to channel emoluments to employees so as to obtain a deduction for the payments when charged, whilst deferring the receipt of the emoluments in the hands of the employee, should be referred to CTIAA (Technical).
- Amounts reserved in accounts, by way of an accounting provision, in respect of emoluments which, although for that period of account, do not become payable to the employee until the happening of some future event. An example of this is a bonus due for a particular period of account which only becomes payable on condition that the employee is still working for the employer in, say, five years' time.