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Question 1

What is the main distinction between employment and self-employment?

Answer 1

Employment involves being an employee, while self-employment involves running a trade, profession, or vocation

The classification determines tax obligations and allowable expenses.

Question 2

What are the two types of income that may be received from employment?

Answer 2

• Employment income
• Self-employment income

Question 3

What is the preferred classification for tax purposes: employee or self-employed?

Answer 3

Employee

This classification allows for tax under PAYE instead of self-assessment.

Question 4

What contributions do employees pay under the PAYE system?

Answer 4

Class 1 National Insurance Contributions (NICs)

Question 5

What is the ‘wholly, exclusively and necessarily’ rule?

Answer 5

A rule applied to determine the deductibility of expenses for employees

This is stricter than the ‘wholly and exclusively’ rule for the self-employed.

Question 6

What indicators are used to determine an individual’s employment status?

Answer 6

• Control over work
• Mutuality of obligations
• Financial risk
• Equipment provision
• Work performance and correction
• Holidays and sickness benefits
• Exclusivity of work

Question 7

What types of income are classified as employment income according to the Income Tax (Earnings and Pensions) Act 2003?

Answer 7

• Employment income
• Certain social security income
• Pension income

Question 8

When is employment income generally considered taxable?

Answer 8

On the earlier of the date of receipt or date of entitlement

Question 9

What is the function of the PAYE system?

Answer 9

To tax income at source

Question 10

What is included in the computation of total income for tax purposes?

Answer 10

• Employment income
• Trading profits
• Property income
• Interest
• Dividends

Question 11

What are benefits in kind?

Answer 11

Receipts of goods or services rather than money

Question 12

What are some examples of exempt benefits in kind?

Answer 12

• Employer pension scheme contributions
• Free or subsidised meals
• Provision of workplace childcare
• Removal costs (first £8k)
• Mobile telephones (one phone)
• £6 per week home working allowance
• Staff parties (£150 per head per annum)
• Car parking at work
• Cheap loans under £10,000

Question 13

How is the basic charge for living accommodation calculated?

Answer 13

Higher of annual rateable value or rent paid by employer, minus any employee contribution

Question 14

What is the additional charge for expensive accommodation?

Answer 14

(Cost - £75,000) x Official rate of interest at start of year

Question 15

What is the general rule for valuing benefits in kind?

Answer 15

The employee is taxed based on the cost of the item as incurred by the employer

Question 16

What is the formula for calculating the assessable benefit of a gifted asset?

Answer 16

Greater of market value at transfer date or when first loaned, minus any sums already assessed, minus price paid by employee

Question 17

What is the tax treatment for cars and fuel provided to employees? (what factors influence amount)

Answer 17

Based on carbon dioxide emissions/range of electric vehicles

Question 18

What is the assessable amount for a low-interest loan provided to an employee?

Answer 18

Based on official rate of interest

Question 19

When calculating the assessable benefit for living accommodation, what must be included?

Answer 19

• Basic charge
• Additional (expensive) accommodation charge
• Ancillary benefits

Question 20

What is the tax treatment for ancillary benefits related to living accommodation?

Answer 20

20% of market value of the asset when first provided, plus costs covered by employer minus employee contributions

Question 21

What happens when an asset loaned to an employee is subsequently sold or given to them?

Answer 21

An additional assessable amount is calculated based on the greater of market values at transfer or loan start, minus any sums already assessed

Question 22

What is the taxable benefit for the use of a barge provided to an employee?

Answer 22

20% of the market value of the asset

Question 23

What is the assessable benefit for Rebecca in the 2024/25 tax year regarding the gift of the barge?

Answer 23

£16,000

The assessable benefit is calculated based on the higher of the market value when gifted (£15,000) or the market value when first made available (£40,000), minus previously assessed benefits.

Question 24

What is the total benefit in kind for Rebecca relating to the use and gift of the barge in 2024/25?

Answer 24

£21,333

This includes £16,000 for the transfer of the asset and £5,333 for her use of the asset during the year.

Question 25

What factors need to be considered for calculating car benefits in kind?

Answer 25

* Petrol/diesel/hybrid/emissions/electric cars * Contributions towards the cost * Date available for use * List price of the car ## Footnote Familiarity with rates and allowances is crucial for accurate calculations.

Question 26

What is the benefit in kind assessable on a van with a maximum laden weight of 3,500kg?

Answer 26

£3,960 ## Footnote There is a fuel charge of £757 per annum for the van.

Question 27

Fill in the blank: The phrase 'wholly, exclusively and necessarily in the performance of the duties of employment' means that an expense must be _______.

Answer 27

[related solely to the performance of duties]

Question 28

True or False: An employee can claim a deduction for the costs of studying for an ACCA qualification.

Answer 28

False ## Footnote The costs are not considered in the performance of their duties as an accountant.

Question 29

What is the maximum allowable payment for mileage reimbursement without tax effect for the first 10,000 miles?

Answer 29

45p per mile ## Footnote This is applicable for the tax year 2024/25.

Question 30

What happens if the mileage allowance paid to an employee exceeds the approved mileage rates?

Answer 30

The excess is taxable ## Footnote If the allowance is less than the approved rates, the deficit is allowable.

Question 31

What percentage is Class 1 Primary NIC paid by employees between the earnings of £12,570 and £50,270?

Answer 31

8% ## Footnote Above £50,270, the rate drops to 2% on gross earnings.

Question 32

What is the Class 1 Secondary NIC percentage rate for employers on gross earnings above £9,100?

Answer 32

13.8% ## Footnote This rate applies to all gross earnings above the threshold.

Question 33

What is the benefit in kind for John who has use of a BMW petrol engine car with a list price of £36,000 and emissions of 154 g/km?

Answer 33

£9,850 ## Footnote This is after considering his capital contribution and running cost contributions.

Question 34

What is the benefit in kind for Matt who has use of a BMW hybrid-electric car with emissions of 39g/km?

Answer 34

£4,800 ## Footnote This calculation is based on the car's list price minus capital contributions.

Question 35

Fill in the blank: If an employee takes a van home from work without other private use, there is _______.

Answer 35

[no benefit]

Question 36

What must be true for an expense to be deductible against employment income?

Answer 36

It must be incurred wholly, exclusively, and necessarily in the performance of duties ## Footnote Personal circumstances do not affect this requirement.

Question 37

What happens to contributions made by an employee towards fuel costs supplied by the employer?

Answer 37

There is no reduction in benefit ## Footnote It is an all or nothing charge for the fuel benefit.

Question 38

What is the primary NIC rate for earnings between £12,570 and £50,270?

Answer 38

8% ## Footnote Primary NICs are calculated based on gross earnings.

Question 39

What percentage is applied to gross earnings above £50,270 for primary NICs?

Answer 39

2% ## Footnote This applies to earnings above the upper limit.

Question 40

What is the secondary NIC rate on all gross earnings above £9,100?

Answer 40

13.8% ## Footnote This rate is applicable to employer contributions.

Question 41

What types of earnings are included in 'gross earnings'?

Answer 41

* wages * bonus * commission * sick pay * vouchers exchangeable for cash or goods ## Footnote Gross earnings are calculated before allowable deductions.

Question 42

What types of earnings are excluded from 'gross earnings'?

Answer 42

* most taxable non-cash benefits (e.g., cars) * reimbursed business expenses * mileage allowance (if not exceeding approved rates) ## Footnote NICs are payable on benefits in kind under Class 1A.

Question 43

What is the rate for Class 1A NICs on taxable benefits?

Answer 43

13.8% ## Footnote This rate applies to the total value of taxable benefits.

Question 44

What is the maximum employment allowance an employer can claim to reduce Class 1 secondary contributions?

Answer 44

£5,000 per tax year ## Footnote This allowance is not available for excluded employers.

Question 45

What is the Class 2 NICs status for self-employed individuals?

Answer 45

Voluntary ## Footnote There are unusual rules around Class 2 NICs, which are not studied this year.

Question 46

What is the Class 4 NICs rate for profits between £12,570 and £50,270?

Answer 46

6% ## Footnote This rate applies to taxable trading profits after deducting trading losses.

Question 47

What is the Class 4 NICs rate on profits exceeding £50,270?

Answer 47

2% ## Footnote This applies to profits above the specified threshold.

Question 48

What should you check for tutorial group information?

Answer 48

Timetable ## Footnote This is essential for attending the correct tutorial sessions.

Question 49

Fill in the blank: Employers pay Class 1A NICs on '_________' at a rate of 13.8%.

Answer 49

taxable benefits ## Footnote Non-cash vouchers are excluded from this calculation.

Question 50

True or False: The employment allowance can be claimed multiple times by an employer in a tax year.

Answer 50

False ## Footnote The allowance is one per employer, with a maximum of £5,000.