Paper F6 (UK): Taxation FA2009
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Date of receipt for directors
Directors, as the senior management in an organisation, determine when employees
– including themselves – will receive their remuneration. They are therefore in a
position to manipulate their income tax liability by deliberately accelerating or
delaying the receipt of income between tax years, to ensure they are taxed at the
lowest possible rate of tax.
The date of receipt for directors is the same as for employees, but with two further
rules, as follows. The date of receipt is the earliest of:
(1) the date that the director becomes entitled to receive the income,
(2) the date that the income is actually received by the director
(3) the date that the financial accounts are credited with an amount for the
director on account of earnings, and
(4) where earnings are determined (for example, at a directors’ board meeting):
− before the end of the accounting period, the last date of the accounting
period, or
− after the end of the accounting period, the date the amount of earnings for
that period is determined.
PAYE: deduction of income tax on employment income at source
Usually cash remuneration is received by an employee on a regular weekly or
monthly basis, and income tax is deducted at source under the PAYE (pay-as-you-
earn) scheme.
However, the gross remuneration received in the tax year must be brought into the
employee’s income tax computation in order to compute the income tax liability.
Any PAYE deductions are an allowable tax credit in the income tax payable
computation.
2.3 Overview of assessing benefits of employment
Benefits of employment are rewards to an employee that are not received in cash
but in kind (i.e. in a form other than cash). For example, an employer may provide
an employee with a company car or mobile phone and pay all the expenses relating
to the asset. Benefits are often referred to as benefits-in-kind or BIKs.
Cash remuneration is straightforward to quantify and charge to tax. However,
deciding the amount that should be charged to tax in respect of a benefit received
from employment is more complex.
The tax legislation therefore provides a benefits code setting out:
the general rules that must be applied to value a benefit for taxation purposes,
and
specific statutory rules to value some particular benefits.