Treatment of retirement "golden handshake"

Retirement "golden handshake" for director

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Good Morning. Is it common practice to pay a director a sizeable one off payment on retirement? Or would this be classed as unusual? If such discretionary payment was made then would this be treated as on operational cost and charged as such in reaching Net Profit /Operating Profit. Any advice would be much appreciated thanks.  

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By bernard michael
31st May 2018 09:43

Is it a small or close company in which the director had shares and is any of the " goodbye " contractual ?

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Replying to bernard michael:
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By AnthonyG
31st May 2018 09:57

No it's not small or close and is not contractual

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By Adam12345
31st May 2018 10:10

Debatable. But on the basis the employee is leaving and it is not contractual, it would be hard to argue it is incurred wholly and inclusively for the purposes of the trade and therefore, in my view, not deductible for CT.

Similar to redundancy payments on the cessation of a trade I would imagine.

You have also got the question of how to tax the payment for the individual who is retiring.

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By johngroganjga
31st May 2018 10:11

Yes it's quite common. I can't be more precise than that. I have no statistics. What is the reason for your question? Most companies are happy to do what seems right for them, regardless of what another company might do in their position. So I am not sure why it matters how widespread the practice is.

Yes the accounting treatment will be as you describe.

The difficult area with these payments is whether they are taxable in the hands of the recipient or not. You don't ask about tax, so presumably you have that sorted.

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By AnthonyG
31st May 2018 11:18

I believe that FRS 102 is less prescriptive than old GAAP used to be, and it is therefore more a question of judgement. So was looking for views on this really as to whether the norm would be to charge this before operating profit. Thanks

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Replying to AnthonyG:
By johngroganjga
31st May 2018 11:55

To save us looking, why don’t you remind us how FRS102 defines exceptional items - then we can comment if necessary?

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Replying to johngroganjga:
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By AnthonyG
31st May 2018 12:59

Hi John it's something that an accounting colleague has said to me. I too would have to look deeper. Just looking for views to be fair.Thanks

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By AnthonyG
01st Jun 2018 11:31

Thanks guys

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