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HMRC internal manual

Employment Income Manual

HM Revenue & Customs
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Employment income: basis of assessment for general earnings: the time when earnings are received: director's earnings fixed after the end of the period for which they are due

Rule 3(c), Sections 18(1) and 686(1) ITEPA 2003 If the amount of a director’s earnings for a particular period is determined after the end of the period to which they relate, they are treated as being received, and paid, at the time the amount is determined. This rule does not apply to employees other than directors (see


For example, a director’s fees for the year ended 31 December 2005 may be fixed on a vote at the annual general meeting on 15 May 2006. Since determination takes place after the period for which the fees are due the date of payment is deemed to be 15 May 2006.

Directors’ earnings are often determined as in the example in the previous paragraph when the shareholders fix the earnings due at the annual general meeting after the year end. But earnings can be determined on other occasions including:

  • when the shareholders vote remuneration at meetings other than the annual general meeting; this may be done quite informally in family companies (see EIM42300)
  • when the director’s service agreement provides for a bonus or commission if sales or profits exceed certain figures; determination will occur when the sales or profit figures are known.The date earnings are determined is not affected by the fact that accounts are not prepared. If the shareholders vote a specific amount of remuneration there will be a determination of the amount of the earnings even if accounts are not prepared. But if earnings are dependent on results see


Note that the rules in this paragraph and at EIM42330apply when the directors’ earnings are determined. They are deemed to have been received, and paid, at that time, even if they are not actually paid or cannot be paid because of a restriction on payment. They will be deemed to have been received and paid even if no entry is made in the company’s records so that the crediting rule at EIM42310does not apply.

As regards the time at which a person must be a director for this rule to apply, see EIM42360.