Corporation Tax Act 2009 section 1290

Employee benefit contributions

Section 1290 restricts when a company can claim a corporation tax deduction for contributions it makes to employee benefit schemes, imposing strict timing conditions and requiring that the contributions result in actual benefits to employees.

• A deduction for employee benefit contributions is only allowed if qualifying benefits are provided, or qualifying expenses paid, out of the contributions within 9 months of the end of the period of account — or if the contribution itself is the qualifying benefit, it must be made within that same timeframe
• No deduction is permitted for contributions relating to a period of account that starts more than 5 years after the end of the period in which the contributions were originally made
• Where qualifying benefits give rise to both an income tax charge and a National Insurance contributions charge, the deduction is only allowed to the extent that those tax charges are paid within 12 months of the end of the period of account and are not subsequently repaid
• The restriction does not apply to certain categories of payment, including consideration for goods or services in the course of a trade, contributions to registered pension schemes, accident benefit schemes, or deductions relating to share incentive plans and employee share acquisitions