SE42710 - Waivers of remuneration: more detail

Sections 202A and 202B ICTA 1988, Section 43 FA 1989

For an overview of waivers of remuneration see SE42705.

A waiver can be of fees and bonuses as well as salary.

The crucial factor for tax purposes is whether the remuneration waived is given up before it is treated as received for Schedule E assessment purposes. Once a director or employee is treated as having received money emoluments (see SE42260 onwards)

• PAYE is deductible
• They are liable to tax under Schedule E on the employee, and
• The employer is entitled to a deduction for them in computing the profits of its business.

A subsequent waiver of remuneration will neither reduce the amount of remuneration subject to PAYE nor the amount liable to tax under Schedule E. For more detail on this point see SE42715.

The link established by Finance Act 1989 between the time when employers can obtain a deduction for emoluments in computing their business profits and the deduction of PAYE from them, should result in companies not voting remuneration which they are unable to pay.