Introduction To Employment Income And Benefits Flashcards
(16 cards)
What does ITEPA 2003 cover?
Taxation of employment income, termination payments, pension income, and social security benefits
ITEPA stands for Income Tax (Earnings and Pensions) Act 2003.
Define ‘employment income’.
‘Employment income’ means remuneration paid in monetary form (salaries and wages) and non-monetary form (such as benefits and share option gains)
Employment income includes various types of compensation received by employees.
What are employees charged to income tax on?
‘Net taxable earnings’ received in the tax year, which is earnings less any allowable deductions
At what point are employees taxed on earnings?
At the date of receipt
What is ‘Rule 1’ concerning cash payments?
The date that the payment is physically made
What is ‘Rule 2’ for directors regarding the date of receipt?
The date the employee becomes legally entitled to the payment
What does ‘Rule 3’ specify for directors?
The earliest of:
* The date the director becomes legally entitled to the payment
* The date when the sums on account of the director’s earnings are credited in the Company accounts
* At the end of the company’s accounting period if the earnings have been determined by the end of that period
* At the date the earnings are determined if that date falls after the end of the Company’s accounting period
What is the taxable amount of a non-cash benefit?
Its ‘cash equivalent’, usually the cost to the employer of providing that benefit
What must employers do regarding taxable benefits?
Employers can register with HMRC to include most taxable benefits in the payroll
What must employers report if a benefit is not included in the payroll?
It must be reported on form P11D
True or False: Most non-cash benefits received by employees are taxable.
True
What type of benefits are taxable under social security?
Jobseeker’s allowance, carer’s housing benefit, working tax credits, child tax credits
These benefits are subject to taxation as per ITEPA 2003.
Which social security benefits are exempt from tax?
Child benefit, pension credit
These benefits do not incur tax obligations according to ITEPA 2003.
Is income from pensions generally taxable?
Yes
This includes the UK state pension and any pension income paid by a former employer.
Fill in the blank: Income from _______ is generally taxable.
pensions
True or False: All social security benefits are exempt from tax.
False
Some benefits like jobseeker’s allowance are taxable.
