Share this content

The morality of an additional salary

A non-resident employee and shareholder with a NT code wants a salary bonus to contra compensation

Didn't find your answer?

I have a client Limited Company who have received compensation from one of the big four banks for a fraud case where the bank admitted their systems were a fault. This in turn has generated higher profits that normal resulting in a much higher corporation tax liaiblity. I have been asked to put through a salary bonus for one of the employees who is also a shareholder in the Company. That employee is non-resident and has an NT PAYE code. The question I have been asked is how high can the bonus be. I wondered what you would do in this situation. 

Replies (2)

Please login or register to join the discussion.

My photo
By Matrix
22nd Jun 2020 19:55

Given they have asked you and assuming you prepare the corporation tax computations for the company, I would advise that any bonus has to be agreed before the accounting year end and paid within 9 months and has to be commensurate with activities undertaken by that employee to obtain a tax deduction. A good benchmark would be to confirm that the amount paid is on arm’s length terms. Would they pay this amount to an unrelated employee carrying out the same duties?

Thanks (1)
Replying to Matrix:
RLI
By lionofludesch
22nd Jun 2020 23:10

Good answer.

Thanks (0)
Share this content