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HMRC internal manual

Business Income Manual

Specific deductions - employee benefit trusts: used with accident benefit schemes

S38(4), S44(1) Income Tax (Trading and Other Income) Act 2005, S1290(4), S1296(1) Corporation Tax Act 2009

Employers may contribute to trusts set up to provide benefits (usually relatively small) to employees who suffer injuries at work, or to their families. Typically the trust is set up by a trade union or employers’ organisation in a particular industry sector and employers contribute on a per employee/per week basis. As and when an appropriate injury or disability occurs a contributing employer or the employee may approach the trustees and ask for payments to be made in accordance with the rules of the scheme.

An employer’s contribution to a trust set up solely to provide accident benefits to employees is an allowable deduction in computing the taxable profits from the employer’s trade.

Timing of deduction

The timing of the deduction follows the treatment of the employer’s contribution in its accounts prepared in accordance with generally accepted accounting practice (GAAP). Deductions for contributions to an accident benefit scheme are specifically excluded from the employee benefit contribution anti-avoidance legislation.

An accident benefit scheme is defined for the purpose of the exclusion as a ‘scheme under which benefits may be provided only by reason of a person’s disablement, or death, caused by an accident occurring during his service as an employee of the employer’.