Bonus Payment Timescales

[thomski]

My business has just exceed the £10k profits for Corporation Tax......
To negate paying this, I was planning to pay a bonus to reduce the liability to
Incidentally, we have paid ourselves a dividend already.

Many thanks.

Paul.

[Ian McTernan CTA]

Paul,

As you will be aware, the payment of a dividend does not affect the amount chargeable to CT, however you do need sufficient retained profit to cover the dividend already paid.

You can vote a bonus and include it in the accounts up to 9 months after the year end for CT purposes, but beware that this bonus for income tax purposes is deemed to be received on the date voted/paid.

If the bonus is unpaid after the 9 month period, then it is written back into the accounts.

You also need to consider the tax position of salary v dividends in general to ensure you are not better off actually paying the CT rather than paying IT & NIC on the bonus, and this is dependent on the level of your income,etc.

I assume the person doing the accounts for the company should be able to advise you on this...

Ian McTernan CTA
Mcternan Associates Ltd
Chartered Tax Advisers
ian@imcternan.com