The principles surrounding the availability of deductions relating to employee cash bonuses are well established and, generally, the outcome is both proportionate and symmetrical: the employer claims tax relief at the point at which the economic benefit has passed to the employee which has a liability to UK income tax. However, in some circumstances, HMRC can take a restrictive approach which results in relief being denied for the employer, thereby giving rise to economic double taxation. The potential for these tax charges is a cost to business and could deter commercial transactions and investment in the UK.
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The principles surrounding the availability of deductions relating to employee cash bonuses are well established and, generally, the outcome is both proportionate and symmetrical: the employer claims tax relief at the point at which the economic benefit has passed to the employee which has a liability to UK income tax. However, in some circumstances, HMRC can take a restrictive approach which results in relief being denied for the employer, thereby giving rise to economic double taxation. The potential for these tax charges is a cost to business and could deter commercial transactions and investment in the UK.
If you are not a subscriber, subscribe now to read this content.
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