It is my understanding that directors' bonuses can be accrued into the annual accounts and claimed as a tax deduction in the year of accrual as long as
the bonus is paid within 9 months of the year end date.
Is it then a condition of this tax allowance that such accrued bonuses must be paid by way of a 'payroll reportable' payment and cannot be paid by means of an additional employer's contribution to the directors' pension ?
Am I being naive in thinking that where a business has genuinely invested in R&D there should be some evidence of this on the bottom line for the year in question ??
ER nic on BIK @ 13.8% plus personal tax @ 21% (Scotland) will cost the family more than the Corp Tax saving @ 19% - hence better to charge to directors loan a/c and declare as a dividend and pay 7.5 % dividend tax than to expense as BIK at net cost of 15.8%.
Cost in excess of £50 each so unable to go down trivial benefit route.
For clarity, the company in question is a client of mine and the meal was paid for by the company.
I have advised my client that no VAT can be claimed on the cost of the meal and I have advised them to charge the whole cost to the directors' loan account as a personal expense, which is obviously not what they wanted to hear.
In posting the question I am simply looking for a second opinion to confirm that I have advised my client correctly.
The situation relates to a small company with one employee & one director. Company premises are in a rural location with no public transport. The employee is being given a van to get himself to and from work and will also use the van to pick supplies and make deliveries for the business.
It is my understanding there will be no benefit-in-kind if the employee's personal use of the van is limited to his ordinary commute and incidental personal journeys and that the case for this will be strengthened if the company has a robust policy in place for the employee to sign up to.
Stepurhan, I greatly appreciate your reponse, and I wasn't trying to be misleading by not mentioning the farmhouse in my original posting as much of the farm activity in this case is undertaken on a farming contract basis. The fact that the farm owners lives in the farmhouse is more incidental than vital to the running of the farm, and the situation is closer to that of a home office than the traditional concept of a farmhouse with lambs warming in the aga hot box, and the farmer needing to be on hand 24/7 to attend to sick animals in the middle of the night.
I hate to say ' I told you so', but those of us who chose to stick to our spreadsheet guns despite the ridicule and marketing pressure we have had to endure from the software lobby, predicted many of the pigeons that are now coming home to roost for business using MTD packaged software.
My answers
Thank you.
I now see this is clearly spelled out in HMRC's Pensions Tax Manual at PTM043100
It is my understanding that directors' bonuses can be accrued into the annual accounts and claimed as a tax deduction in the year of accrual as long as
the bonus is paid within 9 months of the year end date.
Is it then a condition of this tax allowance that such accrued bonuses must be paid by way of a 'payroll reportable' payment and cannot be paid by means of an additional employer's contribution to the directors' pension ?
Am I being naive in thinking that where a business has genuinely invested in R&D there should be some evidence of this on the bottom line for the year in question ??
ER nic on BIK @ 13.8% plus personal tax @ 21% (Scotland) will cost the family more than the Corp Tax saving @ 19% - hence better to charge to directors loan a/c and declare as a dividend and pay 7.5 % dividend tax than to expense as BIK at net cost of 15.8%.
Cost in excess of £50 each so unable to go down trivial benefit route.
For clarity, the company in question is a client of mine and the meal was paid for by the company.
I have advised my client that no VAT can be claimed on the cost of the meal and I have advised them to charge the whole cost to the directors' loan account as a personal expense, which is obviously not what they wanted to hear.
In posting the question I am simply looking for a second opinion to confirm that I have advised my client correctly.
Many thanks.
Thank you for picking up my question.
The situation relates to a small company with one employee & one director. Company premises are in a rural location with no public transport. The employee is being given a van to get himself to and from work and will also use the van to pick supplies and make deliveries for the business.
It is my understanding there will be no benefit-in-kind if the employee's personal use of the van is limited to his ordinary commute and incidental personal journeys and that the case for this will be strengthened if the company has a robust policy in place for the employee to sign up to.
Stepurhan, I greatly appreciate your reponse, and I wasn't trying to be misleading by not mentioning the farmhouse in my original posting as much of the farm activity in this case is undertaken on a farming contract basis. The fact that the farm owners lives in the farmhouse is more incidental than vital to the running of the farm, and the situation is closer to that of a home office than the traditional concept of a farmhouse with lambs warming in the aga hot box, and the farmer needing to be on hand 24/7 to attend to sick animals in the middle of the night.
It is unlikely the house will ever be sold. The business is a farm and the office is in the farmhouse, so the CGT angle has no bearing.
I hate to say ' I told you so', but those of us who chose to stick to our spreadsheet guns despite the ridicule and marketing pressure we have had to endure from the software lobby, predicted many of the pigeons that are now coming home to roost for business using MTD packaged software.