Q. Our company has a year end of 31 July. We have been able to increase our profits despite COVID-19 and are likely to vote a bonus to the directors for the first time in several years. The problem is we are unlikely to have the cash to make payment until November for various logistical reasons. Can we include the bonus as a deduction in the accounts to 31/07/2021?
A: Yes - if you act promptly. To be able to deduct the bonus from this year's taxable profits, you need to create an obligation to pay it before the year end. You should hold a board meeting to do this. Once the obligation is created, the amounts must be paid within nine months of the year end, so payment in November will not be a problem.
The information provided in this blog is for general informational purposes only and should not be considered professional advice. As far as we are aware, the content is accurate at time of publication. Torgersens assumes no responsibility for errors or omissions in the content or for any actions taken based on the information provided.
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