Companies
Unpaid salaries and bonuses: the six-month rule in section 996
Last updated 16 October 2026
A business may deduct wages or a bonus in its accounts before paying them. If not paid within six months of the year end, PAYE is due as if paid then.
A company or business can deduct salaries and bonuses in its accounts for the year the work was done, even if it pays them later. Section 996 of the Taxes Consolidation Act 1997 stops that timing gap from delaying PAYE indefinitely. It matters most for directors' bonuses voted after the year end.
The rule
Pay that has been deducted as an expense but is still unpaid is treated as paid on the last day of the accounting period. So PAYE, USC and PRSI are due as if it had been paid then. The rule doesn't apply if it is actually paid within six months of that date.
An example
A company's accounting year ends on 31 December 2025, and it accrues a €10,000 bonus for a director in the 2025 accounts.
| Bonus paid | What happens |
|---|---|
| By 30 June 2026 | Section 996 doesn't apply. PAYE is operated when the bonus is paid and reported on the payroll submission for that pay date. |
| After 30 June 2026 | The bonus is deemed paid on 31 December 2025. The company must amend its December 2025 payroll submission to include it, and interest can run on tax paid late. |
Either way, a proprietary director (who owns or controls more than 15% of the company) is taxed on an earnings basis. The bonus goes on their 2025 Form 11, because it was earned in 2025.
Long accounting periods
Where accounts cover more than 12 months, unpaid pay is spread evenly over the period. It is treated as paid at each 31 December within it and at the end of the period. The time to pay is the later of six months after each date or 18 months from the start of the period.
What doesn't count
- pay covered by a PAYE Exclusion Order: see exclusion orders
- pay not deducted in the accounts at all
Practical points
- Vote and pay directors' bonuses within six months of the year end, or be ready to amend the year-end payroll submission.
- Keep board minutes showing when a bonus was declared and when it was paid.
- Compare a bonus with a dividend before deciding how to extract profit: see our salary or dividend calculator.
Work it out
Sources
- Revenue: Pay and file system: how does it work? (checked 25/10/2026)
General information, not tax advice. HeyPenny is not a tax agent.