BIM44610 | Specific deductions: employee benefit trusts: general-purpose EBTs: timing of deductions for contributions: computing adjustments: example

From HM Revenue & Customs · Business Income Manual

This example shows how to compute the amount of deductions for employee benefit contributions which are:

disallowed in computing the employer’s taxable profits for a period to the extent that qualifying benefits or qualifying expenses are not paid within nine months of the end of the period; and
allowed as a deduction in computing the employer’s taxable profits for later periods in which qualifying benefits are paid.
employee benefit contributions made before 1 April 2017 (CT) or 6 April 2017 (IT). The example at illustrates the further restrictions for employee benefit contributions made or to be made on or after 1 April 2017 (CT) and 6 April 2017 (IT).

Example

Employer has a past pattern of paying bonuses under a discretionary bonus scheme.
Employer contributes £1 million to EBT to fund likely bonuses for the next three years.
No qualifying benefits paid 1/1/10 to 30/9/11.
No qualifying expenses paid 1/1/10 to 30/9/11.

-	Amount
Deduction in profit and loss account under GAAP (for constructive obligation to pay bonuses)	£333,333
Disallow (and carry forward)	£333,333
Total deduction allowed for tax purposes	Nil

-	Amount
Deduction in profit and loss account under GAAP	£333,333
Disallow (and carry forward)	£333,333
Total deduction allowed for tax purposes	Nil

-	Amount
Deduction in profit and loss account under GAAP	£233,334
Disallow (and carry forward)	Nil
Allow in tax computation (previously disallowed)	£666,666
Total deduction allowed for tax purposes	£900,000

-	Amount
Maximum deduction still to be allowed	Nil
EBT contributions not yet deducted in P&L account	£100,000