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bigduckontax, Accountant
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P11D: A director was due a bonus ending 31st March 2016,

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P11D: A director was due a bonus for year ending 31st March 2016, based on a mathematical formula involving EBITDA and revenue performance against budget. The bonus is accrued in the company accounts, but the bonus can only be actually paid (due to an investment agreement) when the company accounts have been finalised and the audit report signed off. This happened in November 2016. The director was paid over an estimate of the net amount due to him in March 2016, but our accountants are insisting on treating this as a beneficial loan for P11D purposes between March and November 2016, when it was put through the payroll. Is this correct?
Submitted: 10 months ago.
Category: Tax
Expert:  bigduckontax replied 10 months ago.

Hello, I am Keith, one of the experts on Just Answer, and pleased to ba able to help you with your question.

It's a bit pedantic; what is your auditor's opinion? In any event as far as the individual is concerned he will only be taxed once on these moneys either through the P11D or through PAYE. I would submit that it is a hammer to crack a nut and, as my old boss was wont to say, does not alter the price of cheese. It will probably cost more srguing with your accountants over this so frankly the game is not worth the candle.

I do hope that I have been able to shed a glimmer of light on the position.

Customer: replied 10 months ago.

Actually he appears to be being taxed twice. Once in November when it went through the payroll and then now on the P11D for the loan benefit!

It is not really a matter with auditors, but with the accounting firm that prepare our P11Ds.

Expert:  bigduckontax replied 10 months ago.

Then it should be taken up with the accounting firm. Telling them to repay the duplicated tax from their own resources should concentrate their minds wonderfully as would a recovery action by the director in the Small Claims Court. I would also suggest that a change of accountants to one with a greater knolwedge of Income Tax proceedures that is currently being displayed might be a way forward.

Customer: replied 10 months ago.

Hi Keith, I am a bit confused here. How are you saying that the bonus should be treated?

Customer: replied 10 months ago.

Just to be clear, he was actually PAID an estimate of the net due in March 16 and this was not put through the payroll.

Expert:  bigduckontax replied 10 months ago.

In my opinion it should have been passed through PAYE channels when actually paid and any final adjustment at a later date ditto. It's the rough and ready twist of the spoon to stop the treacle running off so to speak.

If the entitlement is to a specific date different from the actual payment date he can always ask HMRC to make an adjustment to his personal tax account through his own tax office.

In any event directors must be paid through PAYE so the estimate being paid was improperly processed.

Customer: replied 10 months ago.

I see, so it was wrong to show it as a director loan when paid over initially?

Expert:  bigduckontax replied 10 months ago.

Well, it is not an accounting treatment I would recomend. By paying gross instead of through PAYE channels a loan to a director was effectively created and not unexpectedly duly reported on the P11D. The whole process has been made exceptionally complex instead of not complying with the rule that emoluments to directorrs must be made through the PAYE system.

Customer: replied 10 months ago.

OK, thanks.

Expert:  bigduckontax replied 10 months ago.

Delighted to have been of assistance.

Please be so kind as to rate me before you leave the Just Answer site.

bigduckontax, Accountant
Category: Tax
Satisfied Customers: 3603
Experience: FCCA FCMA CGMA ACIS
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Expert:  bigduckontax replied 10 months ago.

Thank you for your support.

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