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HMRC internal manual

Business Income Manual

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HM Revenue & Customs
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Specific deductions: employee benefit trusts: general-purpose EBTs: timing of deductions for contributions: overview

S38 Income Tax (Trading and Other Income) Act 2005, S1290 Corporation Tax Act 2009

The employee benefits contribution legislation broadly matches:

  • the timing and amount of employers’ deductions for employee benefit contributions, and
  • the timing and amount of benefits received by employees in the form of money or assets which are taxable and subject to employers’ National Insurance Contributions (under Class 1, 1A or 1B).

Approach of the legislation

The aim of the employee benefit contribution legislation is that deductions for providing benefits to employees via a scheme (for example, through intermediaries such as EBTs) should, as far as possible, be broadly the same (both in terms of timing and amount) as they would be if the employer had provided the benefits directly to the employees.

The ‘matching’ approach therefore reflects the fact that when employers provide remuneration and other benefits direct to their employees, in general:

  • the benefits are taxable when received by the employees,
  • the benefits, when received by the employees, give rise to a liability to employers’ NICs,
  • the timing of any deduction for the employer’s expenditure is broadly aligned with the time that the employees receive remuneration for employment Income Tax purposes (see BIM47130),
  • if the employee’s benefit is the personal use of an asset (for example a company car), no deduction would be given in computing the employer’s taxable profits for its capital expenditure in acquiring the asset or for the amount of the benefit on which the employee is taxed,
  • if the employee’s benefit takes the form of the receipt of a beneficial loan from the employer, no deduction would be given in computing the employers’ taxable profits for making the loan or for the amount of the benefit on which the employee is taxed.