BPTM3080 - Relevant remuneration: when awarded
Paragraph 6 of Schedule 1 to FA 2010
Remuneration awarded in respect of later periods
Two general rules
There are two general rules for determining when relevant remuneration is awarded.
- If a contractual obligation to pay or provide relevant remuneration 'arises' during the chargeable period, it is awarded in that period.
- If the relevant remuneration is paid or provided during that period without any such obligation having arisen during the chargeable period, it is awarded in that period.
Arising
For these purposes, a contractual obligation to pay or provide something to (or in respect of) an employee does not arise until:
- the amount to be paid or provided is fixed (or is capable of becoming fixed without the exercise of discretion by any person).
This derives from paragraph 6(2), which brings paragraph 5(3)(a) into consideration. In contrast, paragraph 5(3)(b) does not apply for the purposes of paragraph 6(1) and so cannot be considered when determining whether a contractual obligation to pay or provide something arises (see the examples at BPTM3066).
In applying this rule, you ignore contingencies. A contractual obligation arises even if payment or provision is dependent on compliance by the employee with any conditions.
Remuneration awarded in respect of later periods
There is an exception to the first of those two general rules (but not the second).
This exception will exclude non-discretionary performance-related remuneration paid or provided only in respect of contribution, performance or similar consideration only for periods falling after the end of the chargeable period.
For example, this exception is likely to exclude sales commission calculated and paid on a periodic basis in accordance with a pre-determined formula that is paid in (and in respect of) periods beginning after 5 April 2010.
The exception applies if three conditions are all met. Relevant remuneration is not awarded during the chargeable period if:
- a requirement exists for the remuneration to be paid or provided at intervals
- the remuneration is to be paid or provided in respect of contribution, performance or similar considerations only for times after the end of the chargeable period, and
- the reduction or elimination of a liability to BPT is not the main purpose (or one of the main purposes) of any person in assuming the obligation to pay or provide the remuneration.
These conditions are applied strictly. For example, the exception will not apply in any of the scenarios discussed in BPTM3120 (relevant remuneration: when awarded: examples).
Special rules
There are four rules which set out other circumstances in which a taxable company may be regarded as having awarded relevant remuneration during the chargeable period. These rules are:
- the special rule covering payments made by an intermediary (see BPTM3090)
- the special rule covering arrangements for future payments etc (see BPTM3100)
- the anti-avoidance rule for certain loans (see BPTM3180), and
- the BPT TAAR (see BPTM3200).
