CTA IND 21-33 Flashcards
(26 cards)
What is the NIC employment allowance?
Employers can deduct maximum of £5,000 from their Class 1 secondary NIC liability.
*liability in previous year must be under £100,000
**not available to ‘one man’ companies v
Key elements of Class 1A NICs:
Paid by employers on cash equivalent of :
-certain taxable benefits
- termination payments in excess of £30,000 exemption
*not applied to benefits charged to class 1 secondary
Amount of Class 1A Nics reported to HMRC on what and when by?
When is the due date for payment of Class 1A Nics
Form P11D, by 6 July following the tax year
22 July following the tax year
When is class 1 B used and when is it due ?
Benefits under PAYE settlement agreement
22 October following the tax year
What are examples of exempt benefits relating to termination payments (x3) ?
- employee legal costs in relation to dispute on termination
- Outplacement counselling and related travel costs
- Retraining courses
Employed or self employed.
Which 4 factors must be present for it to be a contract of service (employee)
- Mutuality of obligation
- Wage paid to the worker
- Personal service
- Control
‘Relevant earnings’ for pension max contribution equals:
employment income + trading income + income from FHL
Pension annual allowance is tapered for :
- Threshold income exceeding £200,000 AND
- Adjusted income exceeding £260,000
1/2 x (Adjusted income - 260,000)
Threshold = net income - gross amount of personal pension contributions
Adjusted = net income + occupational pension contributions + employer contributions
What is the annual allowance CHARGE
Pension input in excess of the annual allowance is subject to a tax charge at the individual’s marginal rate of tax.
(Total pension inputs - annual allowance) x marginal rate of tax
The income tax reducer for qualifying EIS shares is 30% x the LOWER of:
- Amount subscribed
- £1 mil or £2 mil for KICs
Conditions to qualify for EIS relief (person)
- Not connected with company (not employee or own over 30%)
- Must own shares for at least 3 years (otherwise clawback)
- Cannot hold existing shares (unless they were EIS/ SEIS)
Qualifying EIS company key points:
- Unquoted trading company in UK
- Assets not exceed £15 mil before and £16 mil after share issue
- Employs under 250 full time (500 KIC)
- cannot have raised over 5 mil through EIS?SEIS in last 12 months (10 mil for KIC)
- Lifetime limit of funds raised of 12 mil (20 mil KIC)
- Share issue must take place within 7 years of first commercial sale (10 yr KIC)
- Cash raised by issue of EIS shares must be used for trade within two years
Income tax reducer for SEIS is :
50% x amount subscribed (max £200,000)
Conditions for SEIS relief (person)
- Not connected (ie employee or over 30% shares)
- Own shares for at least 3 years (otherwise clawback)
Conditions for qualifying SEIS company:
- Unquoted trading company UK
- Assets not over £350k before issues
- Less than 25 full time employees
- Cash raised must be used for trade within 3 years
- Qualifying activity must be a trade which is not more than 3 yrs old
Conditions for Share incentive plans (SIPs)
- Quoted or not controlled by another company
- All employees must be offered shares on similar terms
Types of shares awarded from a SIP:
- Free shares up to £3,600 worth per year
- Buy partnership shares up to lower of £1,800 or 10% salary + bonus
- Employer can give 2 matching share per partnership share acquired
- Dividends from shares can be reinvested to acquire dividend shares
*salary surrendered to buy partnership shares deducted from gross salary before IT deducted
How does a SAYE share option scheme work?
Arrangement where employees save fixed amount each month into SAYE account.
Can be topped up by tax free bonus from bank.
Funds can be used to exercise options over employer company shares
Conditions for SAYE
- Must be quoted
- All employees eligible (altho under 5 yr can not be)
- Options granted can be at discount up to 20%
- SAYE account must be for three or five years
- Max monthly contribution £500, minimum = £5
Benefits of SAYE
- Any bonuses awarded are tax free
*No income tax or NICs at grant or exercise
*Capital gain equal to difference between cost and sale proceeds
CSOP involves granting options over employer company shares
*employee with over 30% shares in close company cannot participate
What are the main conditions?
- Does not have to be available to all employees
- No discount can be given
- Max value of shares at date of grant over which options can be held is £60,000
Benefits of CSOP:
- No IT or NICs if exercised between 3 and 10 years from grant
- Employee will have capital gain (cost - proceeds)
*If exercise not made between 3 and 10, there is a charge to employment income :
MV at exercise
(option price)
= Employment income chargeable to income tax
**amount charged to IT will be deducted when calculating gain chargeable for CGT
NON tax advantaged share option schemes =
always income tax charge at exercise
MV at exercise
(amount paid for shares)
= amount charged to IT
*must be reported to HMRC online
**PAYE/NICs if readily convertible assets
***capital gain if shares are sold for gain (sale proceeds - MV at exercise)
Conditions for EMIs
- Can be given to selected employees over shares worth up to £250k
- Max value shares in company of EMI = £3 mil
- Must be small trading company with assets under £30 mil and less than 250 full time employees
- if own 30% or more shares = cannot participate
