Employment Income 2

Question 1

passenger payment rate?

Answer 1

5p

Question 2

SMRS rates?

Answer 2

car/van = 45p per mile
motorcycle = 24p per mile
cycle = 20p per mile

SMRS = statutory mileage rate scheme

Question 3

how to calculate car benefit?

Answer 3

list price * CO2%

Question 4

are capital contributions deductible from cars’ list price?

Answer 4

yes, but capped at 5k

Question 5

fuel benefit for 24/24?

Answer 5

27,800

Question 6

if car meets RDE2 standards…

Answer 6

do not add 4%

Question 7

if car does not meet RDE2 standards…

Answer 7

add 4%

Question 8

when is there 0 fuel cost for an employee?

Answer 8

when they reimburse their employer for ALL fuel costs

Question 9

are monthly contributions reduced from car’s taxable benefit?

Answer 9

yes, reduced from the end total

Question 10

if accommodation is job related…

Answer 10

it’s exempt

Question 11

living expenses are capped at…

Answer 11

10% of employee net earnings

Question 12

net earnings?

Answer 12

salary/bonus + benefits (excluding living expenses) - allowable deductions - pension - SMRS

Question 13

living expenses include…

Answer 13

utility bills and furniture

Question 14

if an employer purchases a new asset and immediately gives it to an employee…

Answer 14

the employee is taxed on the cost to the employer

Question 15

where an employee has use of an asset and is then given the asset…

Answer 15

benefit is higher of:
- MV when gifted
- MV when first provided less benefit already taxed

then subtract amount paid to acquire the asset from employer

Question 16

when asset is a vehicle, the benefit is always…

Answer 16

the current market value

Question 17

ORI?

Answer 17

official rate of interest

2.25%

Question 18

when is there is a taxable benefit on loans made to employees?

Answer 18

when the loan is made below the ORI (2.25%)

taxable benefit is the difference between ORI and net interest actually paid

Question 19

there is no taxable benefit on employee loans when…

Answer 19

• total loans to an employee exceed £10,000 in tax year
• loan is made on normal commercial terms by a money lending business

Question 20

if all or part of a loan to an employee is written off..

Answer 20

the amount written off is treated as a benefit and subject to NIC & IT in full at the time of write off

Question 21

if loan balances change throughout the year (repayments are made)…

Answer 21

there are two methods to calculate the benefit

• average method (default)
• strict method (by election)

Question 22

average method (calculating loans)

Answer 22

(balance at the start of the year + balance at the end of the year) / 2

average of the beginning & ending loan balance

Question 23

strict method (calculating loans)

Answer 23

calculates the interest paid at the end of each month

e.g., 6Apr24 - 31Oct24 (4,0000.02257/12)

1Nov24 - 31Dec24 (3,6000.02253/12)

1Jan25 - 5Apr25 (3,2000.02252/12)

Question 24

optional remuneration agreements?

Answer 24

salary sacrifice

scheme through which employee gives up right to an amount of earnings in return for a benefit

e.g., gives up portion of salary to get a free gym membership

Question 25

benefit value for salary sacrifice is...

Answer 25

the higher of: - amount of cash pay given up - the value of the taxable benefit

Question 26

taxable value of benefits received as part of a salary sacrifice are subject to...

Answer 26

class 1A NIC as it's a benefit

Question 27

if a benefit is usually exempt, is it taxable under optional remuneration rules?

Answer 27

yes, even benefits that are normally exempt will be taxable (except for excluded benefits)

Question 28

which benefits are excluded from optional remuneration rules and are NOT TAXABLE?

Answer 28

- pension savings - employer pension advice - childcare - cycle to work - ultra-low emission cars

Question 29

exempt benefit is provided to employees overseas?

Answer 29

- cost of boarding/lodging abroad - travel home expenses - for absences of 60+ days, travelling expenses for spouse & children (2 return visits per person per tax year) - overseas medical treatment/insurance when working abroad

Question 30

living accommodation benefit when job related is...

Answer 30

exempt

Question 31

taxable benefit if employer owns/rents property?

Answer 31

owns = annual value + extra value rents = higher of annual value or rent paid by employer

Question 32

if the employer owned the property for more than 6 years before the employee moved in...

Answer 32

use the market value at the date the employee moved in plus any capital improvements since that date, but before the start of the tax year

Question 33

are capital improvements added to the value of a property (for accommodation benefit)?

Answer 33

yes, if the improvement was made prior to the current tax year