ACCA 'Benefits' Reading Notes

Question 1

how is the basic benefit of employer accommodation calculated?

Answer 1

annual value of the property

if rented, it’s the higher of the annual value or the amount of rent paid

Question 2

how is additional benefit of a property owned by an employer calculated?

Answer 2

cost of the property - £75,000 * official interest rate % = additional taxable benefit

Question 3

how is the cost of the property calculated?

Answer 3

purchase price + improvements

Question 4

if the employer also pays for the running costs of the property, what impact does that amount have on taxable benefit?

Answer 4

the amount paid will also be a taxable benefit

Question 5

if the employer has furnished the property, what is the taxable benefit for the use of the furniture?

Answer 5

20% of its market value when first made available

Question 6

higher of = ?

Answer 6

whichever is higher out of the following

Question 7

what is the taxable benefit on diesel cars?

Answer 7

4% supplement to the percentage applied to the car’s list price (4% is added)

Question 8

what is the maximum taxable benefit for diesel cars?

Answer 8

37%

Question 9

do amounts paid by the employee towards running costs impact taxable benefit?

Answer 9

yes, any amounts paid by the employee reduces the taxable benefit (apart from fuel)

Question 10

how is the taxable benefit for fuel calculated?

Answer 10

the same percentage for the car is applied to the fixed amount of £25,300

if the employee pays for all private fuel, there’s no taxable benefit

Question 11

if the car does/doesn’t meet the RDE2 standard, what happens?

Answer 11

does - it won’t be supplemented 4%

doesn’t - it will be supplemented 4%

Question 12

is there taxable benefit when an employee receives a tax free loan?

Answer 12

yes

when the loan is either interest free or below 2%

Question 13

how is an interest free loan from an employer taxed?

Answer 13

two methods:

the average or the strict method

average method is applied unless stated otherwise

Question 14

what is ‘the average method’ for calculating taxable benefit on an interest free employer loan?

Answer 14

official interest rate is applied to the average of the outstanding amount at the start and end of the tax year

e.g., (outstanding amount when loan was made+outstanding amount when loan was repaid) /2 * interest rate%

Question 15

what is ‘the strict method’ for calculating taxable benefit on an interest free employer loan?

Answer 15

the official interest rate is applied to the outstanding amount on a monthly basis

e.g., (amount outstanding x/12 months * interest rate%) + (amount outstanding x/12 months * interest rate%)

Question 16

is there still taxable benefit on an employer loan if it exceeds 10,000?

Answer 16

no

Question 17

reduction = ?

Answer 17

the taxable benefit is proportionately reduced if it is only available for part of the tax year (e.g., taxable benefit * x/12)

Question 18

contribution = ?

Answer 18

any contribution made by an employee will reduce the taxable benefit (e.g., £70 contribution reduces taxable benefit by £70)

Question 19

what comes first? the reduction or the subtraction of the contribution?

Answer 19

reductions are calculated first proportionately, and then contributions are subtracted