Employment Income

Question 1

employment income pro forma

Answer 1

salary xxx
bonus/commission xxx
taxable benefits xxx
reimbursed expenses xxx
cash vouchers xxx

less: allowable deductions
expenses (xxx)
pension contributions (xxx)
subscriptions to professional bodies (xxx)
charitable donations (xxx)
travel expenses (xxx)
mileage allowance (xxx)

Question 2

expenses incurred wholly for work?

Answer 2

deductible

Question 3

contributions to pension scheme?

Answer 3

deductible

Question 4

subscriptions to professional bodies?

Answer 4

deductible

Question 5

charitable donations?

Answer 5

deductible

Question 6

travel expenses?

Answer 6

deductible

Question 7

use of own car - mileage allowance?

Answer 7

deductible?

Question 8

cash vouchers?

Answer 8

added to employment income

Question 9

reimbursed expenses?

Answer 9

added to employment income

Question 10

taxable benefits?

Answer 10

added to employment income

Question 11

bonus/commission?

Answer 11

added to employment income

Question 12

basis of assessment for employment income?

Answer 12

receipts basis

Question 13

when are employment earnings deemed to have been received?

Answer 13

earlier of:
- the actual payment date
- the date on which the individual becomes entitled to the payment

Question 14

when are non-monetary earnings deemed to have been received?

Answer 14

when the employee receives the benefit

Question 15

when are directors deemed to have received employment earnings?

Answer 15

earliest of:
- the actual payment date

• the date which they become entitled to payment
• the date on which earnings are credited in the company’s accounts
• the last day of the period of account if earnings are determined before the end of the period
• the date on which the earnings are determined

Question 16

allowable deductions?

Answer 16

deductions from total taxable earnings = net taxable earnings

Question 17

can taxable earnings be negative?

Answer 17

no

Question 18

expenses incurred by employees are allowable deductions if…

Answer 18

• the employee must pay the expense
• the expense is wholly for work purposes

Question 19

examples of deductible expenses?

Answer 19

• professional subscription fees
• proportion of expenses (if required to WFH)
• necessary tools, uniforms (flat rate deduction)
• employee cash contributions into workplace pension scheme

Question 20

are employer pension contributions to occupational pension schemes deductible?

Answer 20

no, they are an exempt benefit

Question 21

how do reimbursed expenses work?

Answer 21

when an employee is reimbursed expenses by the employer, the amount received is taxable income

Question 22

where an expense is partly allowable and partly disallowable…

Answer 22

exemption can be applied to the allowable part

Question 23

travel expenses?

Answer 23

deductible if they were incurred for work purposes

Question 24

is travel between home and work an allowable expense?

Answer 24

no, unless:
- employee has no normal place of work (travel exp is allowable)

• if employee’s home is the normal place of work (travel exp is allowable)
• if employee has a temporary workplace, for <24months (travel exp is allowable)

Question 25

how are entertaining expenses treated?

Answer 25

depends on the type of expense reimbursed

Question 26

how is an entertaining expense treated when it's reimbursed directly?

Answer 26

exempt income for the employee no deduction from employee's income reimbursed amount is a disallowed expense for employer

Question 27

how are specific entertaining allowances treated?

Answer 27

- included as income for employee - deduct entertaining expenses incurred from employee's income - full allowance is a disallowed expense for employer

Question 28

how are general/round sum allowances treated?

Answer 28

- included as income for the employee - deduct allowable expenses incurred from employee's income - full allowance is a deductible expense for employer

Question 29

how do mileage allowance payments work?

Answer 29

SMRS applies to employees or volunteers using their own vehicle for business travel also receive mileage allowance for business travel from employers

Question 30

SMRS?

Answer 30

statutory mileage rate scheme HMRC statutory rates for 'reasonable' amounts that can be deducted from employment income: car/van = 45p per mile first 10,000miles, then 25p per mile motorcycle = 24p per mile cycle = 20p per mile

Question 31

if mileage payments received by employer exceed statutory rate...

Answer 31

excess is a taxable benefit

Question 32

if mileage payments received from employer are less than statutory rate...

Answer 32

shortfall is an allowable deduction from employment income

Question 33

passenger payments?

Answer 33

an amount paid to employees using a car/van for business travel and carrying another employee as a passenger passenger payment is 5p per passenger mile

Question 34

if passenger payments received from the employer exceed statutory rate...

Answer 34

the excess is a taxable benefit

Question 35

if passenger payments received from the employer are less than statutory rate...

Answer 35

the shortfall is NOT an allowable deduction