A client makes £100k pa profit. If profits rise to £200k next year as a result of sales staff bringing in new recurring customers then a bonus of £50k will be made at the end of next year.
If the target is met then the bonus will need to be accrued in next years accounts as there will be an obligation to pay. However, the client then wants to prepay the bonus and release over two years on the basis that the bonus benefits the company for years to come.
Aside from the fact that the clients desired treatment is not tax efficient, I feel a little uneasy about a bonus prepayment (and the accounts will be subject to audit) and would appreciate readers' comments. Thanks