Corporation Tax Act 2009

Employee benefit contributions U.K.

1290 Employee benefit contributions U.K.

(1) This section applies if, in calculating for corporation tax purposes the profits of a company (“the employer”) of a period of account, a deduction would otherwise be allowable for the period in respect of employee benefit contributions made or to be made (but see subsection (4)).

(2) No deduction is allowed for the contributions for the period except so far as—

(a) qualifying benefits are provided, or qualifying expenses are paid, out of the contributions during the period or within 9 months from the end of it, or

(b) if the making of the contributions is itself the provision of qualifying benefits, the contributions are made during the period or within 9 months from the end of it.

(3) An amount disallowed under subsection (2) is allowed as a deduction for a subsequent period of account so far as—

(a) qualifying benefits are provided out of the contributions before the end of the subsequent period, or

(b) if the making of the contributions is itself the provision of qualifying benefits, the contributions are made before the end of the subsequent period.

(4) This section does not apply to any deduction that is allowable—

(a) for anything given as consideration for goods or services provided in the course of a trade or profession,

(b) for contributions under a registered pension scheme or under a superannuation fund to which section 615(3) of ICTA applies,

(c) for contributions under a qualifying overseas pension scheme in respect of an individual who is a relevant migrant member of the pension scheme in relation to the contributions,

(d) for contributions under an accident benefit scheme,

(e) under Chapter 1 of Part 11 (share incentive plans),

(f) under section 67 of FA 1989 (qualifying employee share ownership trusts), or

(g) under Part 12 (other relief for employee share acquisitions).

(5) For the purposes of subsection (4)(c) “qualifying overseas pension scheme” and “relevant migrant member” have the same meaning as in Schedule 33 to FA 2004 (see paragraphs 4 to 6 of that Schedule).

(6) See also—

• section 1291 (making of “employee benefit contributions”),

• section 1292 (provision of qualifying benefits),

• section 1293 (timing and amount of certain qualifying benefits),

• section 1294 (provision or payment out of employee benefit contributions),

• section 1295 (profits calculated before end of 9 month period),

• section 1296 (interpretation of sections 1290 to 1296),

• section 1297 (some special rules for companies carrying on a life assurance business).

1291 Making of “employee benefit contributions” U.K.

(1) For the purposes of section 1290 an “employee benefit contribution” is made if, as a result of any act or omission—

(a) property is held, or may be used, under an employee benefit scheme, or

(b) there is an increase in the total value of property that is so held or may be so used (or a reduction in any liabilities under an employee benefit scheme).

(2) For this purpose “employee benefit scheme” means a trust, scheme or other arrangement for the benefit of persons who are, or include, present or former employees of the employer.

1292 Provision of qualifying benefits U.K.

(1) For the purposes of section 1290 qualifying benefits are provided if there is—

(a) a payment of money, or

(b) a transfer of assets,

which meets condition A, B, C or D.

(2) Condition A is that the payment or transfer gives rise both to an employment income tax charge and to an NIC charge.

(3) Condition B is that the payment or transfer would give rise to both charges if—

(a) the duties of the employment in respect of which the payment or transfer was made were performed in the United Kingdom, and

(b) the person in respect of whose employment the payment or transfer was made met at all relevant times the conditions as to residence or presence in Great Britain or Northern Ireland prescribed under section 1(6) of the Contributions and Benefits Act.

(4) Condition C is that the payment or transfer is made in connection with the termination of the recipient's employment with the employer.

(5) Condition D is that the payment or transfer is made under an employer-financed retirement benefits scheme.

(6) None of the conditions is met if the payment or transfer is by way of loan.

(7) In this section—

• “the Contributions and Benefits Act” means—

  (a)

  the Social Security Contributions and Benefits Act 1992 (c. 4), or

  (b)

  the Social Security Contributions and Benefits (Northern Ireland) Act 1992 (c. 7),

• “employment income tax charge” means a charge to tax under ITEPA 2003 (whether on the recipient or on someone else), and

• “NIC charge” means a liability to pay national insurance contributions under section 6 (Class 1 contributions), section 10 (Class 1A contributions) or section 10A (Class 1B contributions) of the Contributions and Benefits Act.

1293 Timing and amount of certain qualifying benefits U.K.

(1) If the provision of a qualifying benefit—

(a) takes the form of a payment of money, and

(b) is not made under an employer-financed retirement benefits scheme,

the benefit is provided for the purposes of section 1290 when the money is treated as received for the purposes of Chapter 4 of Part 2 of ITEPA 2003 (applying the rules in section 18 of that Act (receipt of money earnings)).

(2) If the provision of a qualifying benefit takes the form of a transfer of an asset, the amount provided for the purposes of section 1290 is the total of—

(a) the amount (if any) spent on the asset by a scheme manager, and

(b) in a case where the asset was transferred to a scheme manager by the employer, the amount of the deduction that would be allowable as mentioned in subsection (1) of that section in respect of the transfer.

(3) But if the amount given by subsection (2) is more than the amount that—

(a) is charged to tax under ITEPA 2003 in respect of the transfer, or

(b) would be so charged if condition B in section 1292 were met,

the deduction allowable under section 1290(2) or (3) is limited to that lower amount.

1294 Provision or payment out of employee benefit contributions U.K.

(1) For the purposes of section 1290(2)(a)—

(a) any qualifying benefits provided, or

(b) any qualifying expenses paid,

by a scheme manager after the receipt by the scheme manager of employee benefit contributions are treated as being provided or paid out of the contributions.

(2) The rule in subsection (1) operates up to the total amount of the contributions reduced by the amount of any benefits or expenses previously provided or paid as mentioned in section 1290(2)(a).

(3) For the purposes of section 1290(3)(a) any qualifying benefits provided by a scheme manager after the receipt by the scheme manager of employee benefit contributions are treated as being provided out of the contributions.

(4) The rule in subsection (3) operates up to the total amount of the contributions reduced by the amount of any benefits or expenses previously provided or paid as mentioned in section 1290(2)(a) or (3)(a).

(5) For the purposes of this section no account is taken of any other amount received or paid by the scheme manager.

1295 Profits calculated before end of 9 month period U.K.

(1) This section applies if the income of the period of account mentioned in section 1290(1) is calculated before the end of the 9 month period mentioned in section 1290(2).

(2) It must be assumed, in making the calculation, that any benefits, expenses or contributions which are not provided, paid or made when the calculation is made will not be provided, paid or made before the end of that period.

(3) But if the benefits, expenses or contributions are subsequently provided, paid or made before the end of that period, nothing in this section prevents the calculation being revised and any tax return being amended accordingly.

1296 Interpretation of sections 1290 to 1296 U.K.

(1) In this section and sections 1290 to 1295—

• “accident benefit scheme” means an employee benefit scheme under which benefits may be provided only by reason of a person's disablement, or death, caused by an accident occurring during the person's service as an employee of the employer,

• “employee benefit contribution” is to be read in accordance with section 1291(1),

• “employee benefit scheme” has the meaning given by section 1291(2),

• “the employer” is to be read in accordance with section 1290(1),

• “employer-financed retirement benefits scheme” has the same meaning as in Chapter 2 of Part 6 of ITEPA 2003 (see section 393A of that Act),

• “qualifying benefits” is to be read in accordance with section 1292,

• “qualifying expenses” includes any expenses of a scheme manager (other than the provision of benefits to employees of the employer)—

  (a)

  which are incurred in operating the employee benefit scheme, and

  (b)

  which, if incurred by the employer, would be deductible in calculating for corporation tax purposes the employer's profits of any period of account, and

• “scheme manager” means a person who administers an employee benefit scheme (acting in that capacity).

(2) A reference in this section and sections 1290 to 1295 to a company's employee includes the holder of an office under that company, and “employment” is to be read accordingly.

1297 Life assurance business U.K.

(1) This section applies if the employer is a company in relation to which section 76 of ICTA applies (expenses of companies carrying on life assurance business).

(2) In determining for the purposes of section 1290(1) whether a deduction would otherwise be allowable, the effect of section 86 of FA 1989 (spreading of relief for acquisition expenses) is ignored.

(3) But section 1290(3) is subject to that section if, in accordance with subsection (2) above, an amount is allowed as a deduction for a particular period under section 1290(3).

(4) For the purposes of section 86 of FA 1989, the employee benefit contributions are treated as expenses payable for that period which fall to be included at Step 1 in section 76(7) of ICTA.

(5) For the purposes of sections 1290 to 1296—

(a) any reference to a deduction for employee benefit contributions is to be read as a reference to an amount being brought into account under section 76 of ICTA as expenses payable, and

(b) references to deduction are to be read in that light.