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Wages paid within 9 months for self employed

Can somebody clarify the situation regarding self employed people accruing wages and bonuses in the accounting period which have not yet been paid but will be within 9 months?

Does this rule apply for self-employed people in all scenarios and for all employees including wives or husbands?

Sec 36(3) ITTOI 2005 states:

If the remuneration is paid after the end of that 9 month period, a deduction for it is allowed for the period of account in which it is paid.

Sec 37(2) ITTOI 2005 states:

For the purposes of section 36 it does not matter whether an amount is charged for

(a)particular employments, or

(b)employments generally.

Yet I read elsewhere that wages paid to a wife of a self employed man are not allowed to be accrued in the accounts and thus make use of this provision. Can anyone clear this up and point me to any further guidance?


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10th May 2012 16:51

Couple of points

Strictly there must be a constructive liability on the part of the employer to pay the wages to the employee, which liability must exist in the accounting period for which the deduction is claimed.  In other words, it is *not* acceptable 8 months after the accounting period to say hey, it would be nice to pay a bonus to such and such for work done in an accounting period that has already expired and then, since the decision was made and wages paid within 9 months, to go an backdate the claim for relief.

That said, if there was a genuine employment and a genuine decision within the accounting period to pay a set amount for that period, and that amount was paid within 9 months after the accounting period, you are OK.  And this could apply to the wife of the business proprietor (if genuinely employed and justifiable) as for any other employee.

But an individual cannot be an employee of an unincorporated business of which he is the proprietor and cannot receive wages for which a deduction can be claimed in his accounts, whether in the period or at any other time.  The proprietor gets taxed on the profits of the business, after deduction of wages paid to *others*.  Amounts that he personally draws are out of taxable profits, but it is the profits before drawings that form the basis of his tax charge.

With kind regards

Clint Westwood

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14th Dec 2012 12:03


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