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?
What is taxable in job-related accommodation? (£)
- Heating, lighting and cleaning
- Repairing, maintaining or decorating the premises
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
= 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.
What is the basic charge for living accommodation?
Higher of annual value or rent paid by the employer
How do you work out the additional charge for expensive accommodation?
Cost of providing the accommodation- £75,000 x appropriate percentage
What is the annual value?
The annual value is assumed to be the rateable value of the property and represents the yearly rental income the property could be expected to yield.
What does the additional benefit occur?
When the cost of the accommodation exceeds £75,000
How do you work out the cost of providing the accommodation?
Original cost or market value + capital improvements
What is the official rate of interest?
If the property has been owned for more than six years you should use:
Use the property’s market value when first provided to the employee, rather than the original cost.
Can directors claim job related accommodation?
Only if it is necessary and will enable better performance. But only if they have no material interest in the company (no more than 5%) and they are a full-time working director or the company is not for profit.
How is the company car tax benefit calculated?
List price x appropriate % - contributions
What is the list price of a car?
The list price of a car is the price when the car is first registered. Including all accessories. Less any contributions towards.
What is the maximum capital contribution in relation to car expenses?
What is the maximum CO2 percentages?
Diesel percentages are an extra what per CO2 section
From 95 grams of CO2, what % is added?
1% for every 5 grams
When can you time apportion a cars benefit usage?
When the car has not been available for a continuous period of 30 days
What is the basic CO2% for a petrol car?
If the CO2 emissions was 179g/km what would the calculation be?
What criteria does a pool car need to meet? (3)
- Used by more than one employee
- It must not normally be kept overnight at or near the residence of any of the employees making use of it.
- Any private use by an employee must be merely incidental to his or her business use of it.
What is the private fuel base figure for 2016/17?
How do you work out the private fuel benefit?
Base figure x CO2 percentage
How does it work if the fuel benefit is only provided for a proportion of the year?
- If ceased midyear then it can be apportioned
2. If ceased midyear and rejoined again midyear it cannot be reapportioned
You can’t claim what in relation to fuel benefit charge?
Its employees pays all private fuel, how is the fuel benefit calculate?
There is no benefit
What is the flat rate scale charge for private use of vans?
When does no benefit arise for vans?
When the private use of the van in insignificant
If the van is shared what happens?
It is apportioned between employees on a fair basis
What is the fuel charge for vans?
What are employees liable to a benefit charge on loans?
Interest payable - interest actually paid in respect of the tax year
How is interest calculated using the average (or simple) method?
(Bal. outstanding at start of tax year + Bal. outstanding at end of tax year) × 1/2 * 3%
How is interest calculated using the The precise (or accurate) method?
This calculates the benefit day by day on the balance actually outstanding. (monthly in the exam)
What is the exemption amount on small loans?
What is the private use of an asset taxable benefit?
20% of the market value at the time it was first provided
If the asset for an employee is rented, what is assessable amount?
The higher of rent paid by the employer or 20% of market value
If an employer gifts a brand new asset to its employees, how is this treated?
Taxed at cost to the employer
When an asset has been available to an employee, and then gifted, how is this treated?
Higher of asset MV when gifted or asset MV when first made available - any benefits already taxed
If a used car is gifted, how is this treated?
Taxed at market value at the date of transfer