Employment Income Flashcards
(38 cards)
When are employees earnings deemed to be received
Earnings deemed to be received at earlier of:
Payment date
Date which the individual became entitled to the payment
When are directors earnings deemed to be received
Earnings deemed to be received at earlier of:
Actual payment date
Date which became entitled to the payment
Date which the earnings are creditied in the accounts
Last day of the period of account if the earnings are determined before the end of the period
or
Date on which the earnings are determined if they are determined after the end of the accounting period
How are the expenses incurred by an employee allowable
Employee is obliged to incur and pay the expense
Expense if wholly and exclusively for the duties of employment
Examples of Allowable expenses for employment income
Professional sub fees
Proportion of expenses if required to work from home
Necessary tools, uniforms, protective clothing
Employees cash contributiuons into occupational pension scheme
How are reimbursed expenses treated for employees
Amount received is taxable if it doesn’t satisfy allowable expenses rules
Apportion if both partly allowable and disallowable
What is the travel expenses rule for employment income
Between home and work is not allowable
Exceptions
If employee has no normal place of work, travel is allowable
If employee’s home is normal place of work, travel is allowable
If employee has temp workplace (no more than 24 months) travel is allowable
What is the treatment for Entertaining clients (reimbursed directly) for bothe employee and employer
Exempt income for the employee
No deduction from employee income
Reimbursed amount is disallowed for employer
What is the treatment for Entertaining clients (specific entertaining allowance) for both employee and employer
Included as income for employee
Deduct entertaining expenses from employee
Full allowance disallowed for employer
What is the treatment Entertaining clients (General/Round sum allowance) for both employee and employer
Include as income for employee
Deduct allowable expenses from employee income (not entertaining)
Full allowance deductible expense for employer
What is the Mileage rate scheme rates for car, passenger, motorcycle and cycle
First 10,000 miles 45p
25p thereafter
5p per passenger
Motorcycle 24p
Cycle 20p
What happens if mileage payments exceed statutory rate
Taxable benefit
What happens if mileage payments are less than statutory rate
Shortfall is an allowable deduction for employee
What is the Car benefit calc for employment income
List price x CO2 emissions % (hardmans)
Deduct any capital contribution made by employee up to £5,000
What is Job related living accom rules for employment income
If accom is job-related, exempt
If not
All living expenses are benefit limited to 10% employee’s net earnings
What is the Employee net earnings calculation
Salary, bonus, benefits less allowable deductions, SMRS, pension
What is the treatment when Employer purchases new asset and gives it to employee immediately
Employee taxed on cost to employer
What is the treatment when Employee has use of an asset and is then given the asset
Benefit higher of
Market value when gifted
or
Market value when first provided
Less benefit already taxed under private use rules (i.e 20% of markvet value p.a)
Employee contributions deductible
What is the rate for Employment related loans interest
2.25%
How do you calculate the loan benefit
Difference between interest due and interest actually paid
There is no taxable benefit on loans where:
Total loans to an employee £10k or less throughout tax year
Loan is made on normal commercial terms by a money lending business
What happens when a Loan to an employee is written off
Written off amount treated as benefit at time of write off
What are the two loan calc methods and benefit calc
Average method
Strict method (by election)
Loan amount x 2.25%
Less interest paid
Benefit
How do you calculate the average method for loan benefit
Average at start and end/2
How do you calculate the strict method for loan benefit
Calc monthly benefit on balance outstanding at end of each month
