Loans To Employees And Use Of Assets Flashcards
(14 cards)
What is the threshold for a taxable benefit from a loan made to an employee?
The aggregate of all loans outstanding throughout the tax year exceeds £10,000.
(ITEPA 2003, ss. 173-191)
What is the formula for calculating the benefit using the average method?
(Loan at 6 April + Loan at 5 April) / 2 x Average ORI for tax year.
(ITEPA 2003, s. 182)
How is the benefit calculated if there is no loan outstanding at the start of the tax year?
Start with the amount of the loan at the point it was made.
(ITEPA 2003, s. 182)
What to do if the loan outstanding at the end of the year is nil?
Add on the amount of the loan at the point it was repaid.
(ITEPA 2003, s. 182)
How is the benefit apportioned for a loan outstanding in the tax year?
Based on the number of complete tax months for which the loan was outstanding.
(ITEPA 2003, s. 182)
What does the strict method calculate?
Interest on a monthly basis using the exact loan outstanding during the year.
(ITEPA 2003, s. 183)
When can a taxpayer elect for the strict basis of calculation?
If it is lower than the average method.
(ITEPA 2003, s. 183)
What will HMRC insist on if the benefit would otherwise be significantly distorted?
The strict basis of calculation.
(ITEPA 2003, s. 183)
What happens if a loan is released or written off by the employer?
The amount released or written off is treated as earnings.
(ITEPA 2003, s. 183)
How is the benefit calculated if an employee has the use of an asset owned by the employer?
20% x Market value of asset when first provided to an employee.
(ITEPA 2003, s. 205)
What is the benefit to an employee when allowed to keep an asset?
The higher of:
* market value when given
* market value when originally provided less amounts already charged for use of the asset
Refers to ITEPA 2003, s.206
What is the benefit calculation for cars and houses given to an employee?
Market value less any amount paid by the employee
This is an exception to the general transfer rules
Is there a taxable benefit for computer equipment provided to an employee for business use?
No taxable benefit arises
This applies if the equipment is solely for business use
Under what condition does no benefit arise from supplying equipment to an employee?
When the reason for supplying the equipment is to enable the employee to perform their duties and the employee’s private use is not significant
This highlights the distinction between business and personal use
