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HMRC internal manual

Business Income Manual

Specific deductions: provisions: allowability for tax: provisions affected by specific statutory timing rules

Consider whether a provision includes elements that are affected by specific tax rules. For example S1288 Corporation Tax Act 2009 (CTA 2009) and S36 Income Tax (Trading and Other Income) Act 2005 (ITTOIA 2005) provide that in computing taxable profits no deduction may be made for the remuneration of employees unless that remuneration is paid (as defined for PAYE purposes) during the accounting period or within nine months of the end of the accounting period. This means that if a provision includes an element in respect of employee’s remuneration, that element must be disallowed to the extent that the remuneration is not ‘paid’ within nine months of the end of the accounting period.

Interest - companies

The treatment will be determined by statute in every case. If charged to current assets interest is relieved as charged against profits in the accounts, normally when the contract, etc., is complete, or as profit is recognised before completion. If however the interest is capitalised as part of a fixed capital asset or other capital project, S320 CTA2009 permits it to be deducted in the tax computation at the time it is charged to the fixed asset account. See CFM33160.

Other specific provisions

There are a number of other specific provisions that determine when an expense should be deducted and which therefore override the general rule in BIM42215.

Examples of expenditure subject to a statutory timing rule Guidance Effect
S1288 CTA 2009 and S36 ITTOIA 2005 BIM47130 - BIM47145 Allows a deduction for remuneration only at the date it is ‘paid’ for PAYE purposes, except to the extent it is ‘paid’ within 9 months of the balance sheet date.
S79 CTA 2009 S76ITTOIA 2005    
  BIM47200 onwards Allows redundancy payments only at the date of payment; only applies to payments not allowable on general principles; following the Cosmotron decision (CIR v Manufacturing Co Ltd. [1997] 70TC292) many more payments are allowable on general principles.  
  S33 Income Tax (Trading and Other Income) Act 2005, S53 Corporation Tax Act 2009 BIM44540 onwards Allows a deduction for contributions to an employee benefit trust etc. only at the date benefits are provided to employees, except to the extent they are provided within 9 months of the balance sheet date.
  S196 Finance Act 2004 BIM46015 onwards Employer contributions to registered pension schemes.
  S62 CTA 2009 and S60 ITTOIA 2005 BIM46250 onwards Lease premiums
    FPC10000 onwards Film production expenditure. A new regime was introduced by the Finance Act 2006 applying to films commencing principal photography on or after 1 January 2007. This regime applies to companies only and is covered in the Film Production Company Manual.