Annex 1: Minor changes in the law made by the Act: Change 8: Unpaid remuneration of employees: payment made after return submitted but within 9 months of the end of the period of account: sections 37 and 865
This change drops the requirement to make a claim for a deduction for remuneration paid after the return is submitted but within nine months of the end of the period of account in which it is charged.
Section 43(5) of FA 1989 deals with profit calculations made within nine months of the end of the period of account. Paragraph (a) requires the assumption that any remuneration unpaid at the time of the calculation will not be paid by the end of that nine month period. That means the proposed remuneration cannot be deducted in making the calculation. Paragraph (b) provides an adjustment procedure that applies when the remuneration is paid after the calculation is made but before the end of the nine month period. If a claim is made within two years of the end of the period of account the calculation may be adjusted.
This change brings the adjustment procedure into line with the normal Self Assessment rules and deals with the adjustment as an amendment to a return. Section 9ZA(2) of TMA sets a time limit for making such amendments. It is 12 months from the filing date for the relevant return.
The change alters the time available for making the adjustment from two years after the end of the period of account in every case to a date that depends on when the accounting date falls in the tax year. To be within the scope of the provision the taxpayer must submit his or her return within nine months of the end of the period of account.
In the normal case of a continuing trade and a return issued on 6 April the earliest date to which accounts can be prepared and meet this condition is 6 July in the previous calendar year. In principle the change gives taxpayers seven months extra to include the deduction in their self-assessment. The latest date to which accounts can be prepared and meet the condition is 5 April. In principle the change then gives taxpayers two months less to include the deduction in their self-assessment. In practice the return will usually be submitted at a time when it is known whether or not the remuneration has been paid within nine months of the period of accounts.
In the case of a new trade the time limit may be shorter if the period of account ends after a tax year for which it provides the basis period.
	ExampleA new trader makes up his or her accounts for the calendar year to 31 December 2006. These accounts form the basis period for the tax year 2005-06. If the return is issued on 6 April 2006 the latest date for amending the return is 31 January 2008. This is 11 months before the date allowed by section 43(5) of FA 1989.
This change puts the method of allowing relief on the same basis as that in paragraph 6 of Schedule 24 to FA 2003 rewritten as section 43. Schedule 24 to FA 2003 is a similar provision to section 43 of FA 1989. It denies a deduction for amounts charged in respect of employee benefit contributions unless the benefits are provided within nine months of the end of the period in respect of which they are charged.
Paragraph 6 of Schedule 24 to FA 2003 deals with the case in which the return is made before the end of the nine month period. Unlike section 43(5) of FA 1989 it does not require a claim. It provides merely that the calculation can be adjusted. This is the most appropriate way of dealing with the point under Self Assessment.
This change has no implications for the amount of tax due, who pays it or when. It affects (in principle and in practice) only administrative matters.