Finance Act 2003

Restriction of deductions

1 (1) This Schedule applies where—

(a) a calculation is required to be made for tax purposes of a person’s profits for any period, and

(b) a deduction would (but for this Schedule) be allowed for that period in respect of employee benefit contributions made, or to be made, by that person (“the employer”).

But it does not apply to a deduction of a kind mentioned in paragraph 8.

(2) For the purposes of this Schedule an employer makes an “employee benefit contribution” if—

(a) he pays money or transfers an asset to another person (“the third party”), and

(b) the third party is entitled or required, under the terms of an employee benefit scheme, to hold or use the money or asset for or in connection with the provision of benefits to employees of the employer.

(3) The deduction in respect of employee benefit contributions mentioned in sub-paragraph (1) is allowed only to the extent that—

(a) during the period in question or within nine months from the end of it—

(i) qualifying benefits are provided out of the contributions, or

(ii) qualifying expenses are paid out of the contributions,

or

(b) where the making of the contributions is itself the provision of qualifying benefits, the contributions are made during that period or within those nine months.

(4) An amount disallowed under sub-paragraph (3) is allowed as a deduction for a subsequent period to the extent that—

(a) qualifying benefits are provided out of the employee benefit contributions in question before the end of that subsequent period, or

(b) where the making of the contributions is itself the provision of qualifying benefits, the contributions are made before the end of that subsequent period.