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Hello,
I have one question from the BPP exam kit about bonuses.
Judith works for S Ltd for an annual salary of 18.000 GBP a year. On 30 september 2014 she received a bonus of 4.000 GBP in respect of S Ltd’s trading results for the y/e 31 March 2014. She expects to receive a bonus of 4.800 GBP on 30.09.2015 in respect of S Ltd’s results for the y/e 31.03.2015. Judith also received 500 GBP from a customer on 1.12.2014.
What is Judith’s employment income for the tax year 2014/15.
A 22.000
B 22.800
C 22.500
D 23.300
The answer is C (18.000+4000+500)
The bonus received on 30 September 2014 is taxable in 2014/15 as the receipts basis applies to employment income.
I understand that the date received is the earlier of the date when the employee becomes entitled to the payment or the date when the payment was actually received.
So in this case, the bonus of 4.000 GBP should be taxable in the t.y. 2013 (entiteled 31.March 2014)?
Thank you.
No.
The period end date (31 March 2014) is NOT the date the taxpayer became entitled to the bonus! This was simply the end of the period that would be used to compute the bonus payment.
The date the employee becomes entitled to a bonus payment will be given in a question if it is to be used – where no such specific statement is given, as in this example, then simply use the date received!
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