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HMRC internal manual

Employment Income Manual

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HM Revenue & Customs
Updated
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Employment income: basis of assessment for general earnings: the time when earnings are received: the time at which a person must be a director for the special rules to apply

Sections 18(2) and 686(2) ITEPA 2003

The crediting rule at EIM42310 and the determination rules at EIM42330 and EIM42340 apply to an individual who is a director at any time in the year of assessment in which earnings are credited or determined.

So these rules apply to all earnings from that company in the year of assessment even where the crediting or determination occurred in the part of the year before the director was appointed, or after the director left office. They apply to all the earnings the individual gets from the company of which they are a director either as an employee or as a director.

Earnings could be voted in a year when the individual was not a director but for, say, the previous year when he or she was a director. In that case, the payment rules for ordinary employees apply in the year in which earnings are voted. The position would be different if the taxpayer is still in control and is deemed to be a director for the year of receipt under EIM20200. Generally there is little to be gained from attempts to exploit the director definition because the company’s corporation tax deduction will also be governed by the payment rules for ordinary employees.