4 Employment Income Flashcards
What are assessable earnings?
All directors and employees are assessed on the amount of earnings received in the tax year (the receipts basis).
What is the date of receipt?
- Actual payment of, or on account of, earnings.
2. Becoming entitled to such a payment.
What is the date of receipt for directors?
When sums on account of earnings are credited in the accounts
Where earnings are determined:
– before the end of a period of account = the end of that period
– after the end of a period of account = date the earnings are determined.
When can expenditure be deductible?
Expenditure will only be deductible if it is incurred wholly, exclusively and necessarily in the performance of duties.
What are expenses allowable by statute? (5)
- Contributions to a registered occupational pension scheme
- Fees and subscriptions
- Payments to charity through a payroll deduction scheme
- Expenditure on travel and other business expenses
- Capital allowances are available for plant and machinary
What will capital allowances be for deductions?
Capital allowances will be available where an employee uses his own computer for business use. Allowances will be restricted to the proportion of business use
What is the payroll deduction scheme?
Under the payroll deduction scheme an employee authorises his employer to make deductions from his salary and pay the amounts over to specified charities.
When are the payroll deduction scheme donations taken?
The donations are deducted from the employee’s gross pay before tax (PAYE) is applied to his taxable pay.
What happens if the payments made by the employer exceed the approved mileage allowance payments?
Assessed on the employee as a benefit
What happens if the payments made by the employer does not exceed or match the approved mileage allowance payments?
Allowable deduction from employees employment income
What are the two rules which must be applied in relation to all taxable benefits?
- Reduced by any contributions made by the employee towards the cost of the benefit 2. Pro-rated if it was only available for part of the tax year.
What are some examples of tax exempt benefits? (12)
- Vouchers below £50 per gift.
- Employer’s contribution to a registered pension scheme
- Subsidised on-site restaurant if available to all employees
- Car parking spaces
- One mobile phone for private use
- Benefits aimed at encouraging employees to not travel by private car
- Parties up to £150 a head, if exceeds whole amount is taxable.
- Workplace nurseries for child care
- Vouchers for approved childcare limit of £55 a week BR, £28 HR and £25 AR
- Relocation expenses up to £8,000
- Expenses in uk £5, overseas, £10
- Household expenses - £4 per week
- Loans with a beneficial interest rate below £10,000
- Medical benefits for employee to return to work up to £500
Under what conditions does no taxable benefit arise on relocation and removal expenses?
- Totally new employment
- A new role with the existing employer
- A change in location at which the employee’s duties are carried out
- New residence as community would not be viable
- Selling costs, travel and subsistence whilst looking for a new house, removal expenses and interest on bridging loan
What is the exempt medical benefit amount?
£500
What is taxable in job-related accommodation? (£)
- Heating, lighting and cleaning
- Repairing, maintaining or decorating the premises
- Furniture
What is the taxable benefit limited to in relation to job related accommodation?
10% of net earnings
What is the taxable benefit in job-related accommodation?
Cost of providing the benefit
What does cost of providing the benefit in job-related accommodation?
The ‘cost of providing’ the benefit has been held to mean the additional or marginal cost incurred by the employer – not a proportion of the total cost.
How do you report benefits?
- Non cash taxable benefits on a P11D
2. You can tax this through PAYE from April 2016
How is cash vouchers assessed? (3)
- A voucher that can be exchanged for an amount of cash that is greater than, equal to, or not substantially less than the cost of providing it.
- Subject to income tax through the PAYE system when given to employee on the cash amount for which the voucher can be exchanged.
- No further benefit arises
How is non-cash vouchers assessed? (3)
- A voucher that can be exchanged for goods or services.
- Benefit = cost of providing voucher
3,. Exception
= vouchers to provide exempt benefits
(e.g. child care vouchers up to relevant limits)
How is credit token vouchers assessed?
Benefit = value of goods and services bought for private use
When does no taxable benefit arise for credit tokens and no cash vouchers?
.No taxable benefit arises where the employee can show that the use of vouchers or credit tokens was wholly, exclusively and necessarily in the performance of the duties of their employment.
