Compensation payments

Is a compensation payment for injury tax deductible from Corporation Tax?

Didn't find your answer?

I have a client company who has paid £105,000 for injury comensation to a sub-contractor. I need to know if this is a tax deductible payment.  Accounts due inat the end of June and despite research I can't find anything out.

Replies (22)

Please login or register to join the discussion.

avatar
By David Ex
21st May 2021 10:30

Sara Corbett wrote:

despite research I can't find anything out.

Where were you researching? What reference works do you subscribe to?

Have you looked at the HMRC Business Income Manual? It’s certainly covered there.

Thanks (0)
avatar
By The Dullard
21st May 2021 10:32

Probably. It depends really on the detail that I can't find out.

I empathise with you over not being able to find out anything. I frequently find that on AccountingWeb. People want answers, but don't want to put a whole lot of effort into setting out their stall.

Thanks (2)
Replying to The Dullard:
RLI
By lionofludesch
21st May 2021 12:38

I vote maybe.

Thanks (0)
avatar
By Tax Dragon
21st May 2021 10:59

Does the company own a pub? Was the subcontractor asleep when the chimney fell on her?

I've just selected one set of facts discussed in BIM. Tax follows facts. As you provide none, you'll have to work the tax out yourself. Start at 38500.

Thanks (1)
Replying to Tax Dragon:
avatar
By The Dullard
21st May 2021 11:02

HMRC do REALLY like chimneys!

Thanks (1)
Replying to The Dullard:
By Duggimon
21st May 2021 11:13

Subcontractors are less keen on them.

Thanks (0)
Replying to Tax Dragon:
avatar
By Sara Corbett
21st May 2021 12:25

No it d0esn't. No chimneys involved!
The Compensation has been settled out of court and I need to know if I can include it in the profit and loss account.

Thanks (0)
Replying to Sara Corbett:
avatar
By The Dullard
21st May 2021 12:26

I'd be pretty sure that it wasn't a balance sheet item.

Thanks (1)
Replying to Sara Corbett:
Red Leader
By Red Leader
21st May 2021 12:36

You seem very reluctant to provide further facts.

Thanks (0)
Replying to Red Leader:
avatar
By Tax Dragon
21st May 2021 13:15

IMHO, the best use of this forum is to provide signposts (here, BIM38500ff) to professional users. Trying to extract all the facts and then having a vote... it'll take much longer to do it right, in fact it won't be done right - and, frankly, if it won't be done right, why do it at all?

Thanks (1)
Replying to Sara Corbett:
RLI
By lionofludesch
21st May 2021 12:39

Sara Corbett wrote:

No it d0esn't. No chimneys involved!
The Compensation has been settled out of court and I need to know if I can include it in the profit and loss account.

Can I put it more clearly ?

What exactly happened ?

Thanks (0)
Replying to lionofludesch:
avatar
By Sara Corbett
21st May 2021 12:56

A subcontractor (Self Employed not CIS) working for an farm/industrial unit (limited company) had a minor accident over 5 years ago. He took the company to court many years later for compensation and it was settled out of court.
Is the payment an allowable expense to offset against Corporation Tax?

Thanks (0)
Replying to Sara Corbett:
avatar
By paul.benny
21st May 2021 13:05

Was the liability covered by insurance? At the risk of stating something obvious, your client can only deduct the amount they have paid out themselves.

Thanks (1)
Replying to Sara Corbett:
avatar
By David Ex
21st May 2021 13:27

Sara Corbett wrote:

A subcontractor (Self Employed not CIS) working for an farm/industrial unit (limited company) had a minor accident over 5 years ago.

Interesting. I always believed that claims for personal injury compensation following an accident are subject to a 3 year limitation period.

Thanks (0)
Replying to David Ex:
By Duggimon
21st May 2021 13:48

There are a few cases in which it's longer than three years but, to point out the obvious, there's no time limit on out of court settlements.

Thanks (0)
Replying to Duggimon:
avatar
By David Ex
21st May 2021 14:24

Duggimon wrote:

There are a few cases in which it's longer than three years but, to point out the obvious, there's no time limit on out of court settlements.

But you wouldn’t settle out of court a claim that was out of time (well, I wouldn’t!). And, if you did, it might be more difficult to substantiate a claim for tax relief!

Thanks (0)
Replying to Duggimon:
avatar
By paul.benny
21st May 2021 14:53

If there is a time limit, it's likely to be about notifying claim. It can take a long time to reach settlement, especially for larger sums.

Thanks (0)
Replying to paul.benny:
avatar
By David Ex
21st May 2021 14:56

paul.benny wrote:

If there is a time limit, it's likely to be about notifying claim. It can take a long time to reach settlement, especially for larger sums.

True. Odd one though - not a massive amount at the end of the day.

We still don’t know if it was covered by an insurance claim.

Thanks (0)
Replying to Sara Corbett:
avatar
By David Ex
21st May 2021 12:57

Sara Corbett wrote:

I need to know if I can include it in the profit and loss account.

On the basis of the details you have provided, I’d says probably yes.

Thanks (0)
avatar
By frankfx
21st May 2021 11:43

OP

Have you looked behind the radiator in BJ's tax payer refurbished apartment?

I am sure that it is a treasure trove of a resource.

But to get there you will need a key, found in
HMRC Business manual .

Thanks (0)
avatar
By Sara Corbett
21st May 2021 16:39

Thank you for all your comments.
I have enough information now to proceed and go back to my client

Thanks (0)
avatar
By Sara Corbett
21st May 2021 16:39

Thank you for all your comments.
I have enough information now to proceed and go back to my client

Thanks (0)