P&L Treatment of £150 PAYE online incentive

[css_jay99]

Hi,

please i wanted to know what the accounting treatment is the £150 incentive from hmrc online PAYE?

Does this hit the P&L as Income BUT not chargeable for Coporation tax?

Cheers

css_jay99

[malvolio]

AIUI it's income and liable for CT. It's essentially a rebate on a payment, hence increases profits.

[Nixon Williams]

Hi,

please i wanted to know what the accounting treatment is the £150 incentive from hmrc online PAYE?

Does this hit the P&L as Income BUT not chargeable for Coporation tax?

Cheers

css_jay99

It is as you say, it increases the profit but it is NOT subject to Corporatiion Tax, your accountant should have made an adjustment for this when calculating the Corporation Tax due.

Alan

[css_jay99]

It is as you say, it increases the profit but it is NOT subject to Corporatiion Tax, your accountant should have made an adjustment for this when calculating the Corporation Tax due.

Alan

e.g if full employee costs (i.e. gross salary + employer NI) = £20,000

does that mean in P&L

1) deductions B4 Tax - Full employee costs - £20,000,
Additions/untaxable incomes after Tax - £150
OR
2) deductions B4 Tax - Employee costs - £19,850,
Additions/untaxable incomes after Tax - £150

cheers
css_jay99

[PhilAtBFCA]

PAYE Online Incentive

css_jay99

It may help to look at two aspects:-
1. The P&L
2. The CT calculation

In respect of the P&L I would count it as income received. Your profits are therefore larger than without this. If you are keeping your books then you need to take care of this part.

In respect of the CT calculation the total income on your P&L is reduced by the income from paye incentives, and so your profit is reduced, for CT purposes. Your accountant will do this whne preparing the CT600.

If you are calculating CT provision periodically in your management accounts, which is very wise as it will ensure you have a correct figure for calculating potential dividends then if its a manual calculation then calculate it adjusting the profit or income for Paye incentive.

Some online systems like www.freeagentcentral.com do this automatically for you. ( disclosure : another good reason why we recommend it to all our clients )

I hope that helps.

Phil

[css_jay99]

Thanks,

looking on the P&L side sureley one of the two options above should be correct.

Phil, Ok agreed that it counts as untaxable income received, but then what figure should total employee costs (P&L) show? original full cost or lower value with £150 off?


css_jay99

[PhilAtBFCA]

PAYE Incentive is income received

css_jay99

IMHO the only option for the P&L is to count the PAYE incentive as income received.

The costs of the employee(s) are the same and are not reduced by the PAYE incentive.

You appear to want to account for it as a rebate of the cost of the employee, or a rebate of tax and NI, IMHO it is not.

The PAYE incentive is a payment received by the company, therefore income. It is a payment received for a reason - you filed online.

I think that makes it easier to to do the accounts ! Hope that clears it up for you.

Phil

[css_jay99]

css_jay99

IMHO the only option for the P&L is to count the PAYE incentive as income received.

The costs of the employee(s) are the same and are not reduced by the PAYE incentive.

You appear to want to account for it as a rebate of the cost of the employee, or a rebate of tax and NI, IMHO it is not.

The PAYE incentive is a payment received by the company, therefore income. It is a payment received for a reason - you filed online.

I think that makes it easier to to do the accounts ! Hope that clears it up for you.

Phil

Thanks,

That makes it very clear now


css_jay99

[Maslins]

Agree with Phil. Post it to "other income" or similar. Income and expenses should typically not be offset against each other.

It also makes it easier for HMRC to see what's going on when they get your accounts, hence reduces the likelihood of them raising an enquiry (in an admittedly very small way).

[css_jay99]

Agree with Phil. Post it to "other income" or similar. Income and expenses should typically not be offset against each other.

It also makes it easier for HMRC to see what's going on when they get your accounts, hence reduces the likelihood of them raising an enquiry (in an admittedly very small way).

cheers, i guess this way is also good for profits on VAT FRS (but taxable off course)


css_jay99