EIM42330 - Employment income: basis of assessment for general earnings: the time when earnings are received: director's earnings fixed before the end of the period for which they are due

Rule 3(b), Sections 18(1) and 686(1) ITEPA 2003

If the amount of a director’s earnings for a particular period is determined before the period ends, they are treated as being received, and paid, at the end of that period. This rule does not apply to employees other than directors (see EIM42260).

For example, at a shareholders’ meeting on 1 June 2005 a director is voted a special bonus of £5,000 for the year ending on 31 July 2005. Determination therefore takes place on 1 June 2005 but the earnings are treated as paid on 31 July 2005, the end of the period for which the bonus is due.

Where a director has a service agreement that provides for a regular monthly salary, one of the earlier payment rules will usually apply before this determination rule. For example, there may be an actual payment each month (see EIM42270), or the director may be entitled to be paid each month (see EIM42290).

As regards:

  • restrictions on payment, see EIM42340
  • earnings that are dependent on results, see EIM42350
  • the time at which a person must be a director for this rule to apply, see EIM42360.