Delay Tax On Bonus Payments

Paying a director’s salary or bonus is a Corporation Tax deductible cost for a company. The taxman could dispute a deduction if the remuneration is excessive compared to the company’s income. However, the timing of a tax deduction is a different matter.



Nine-month rule:
According to the Corporation Tax rules, a deduction can be claimed in the company’s accounts as long as the remuneration is paid no later than nine months from the end of the accounting period.

For example:
In the year ended 30 April 2017 Dotcom Ltd accumulated a large amount of profit and its director, Dave, decided to pay himself a bonus. The bonus is due for payment and actually paid in December 2017. As the bonus is paid within nine months of the company year-end, Dotcom Ltd will get a Corporation Tax deduction in its 30 April 2017 accounts. However, the bonus is only taxed for PAYE purposes when it is paid in December 2017.