tax Q mistake

Question 1

what do you do with gift aid payments for employment income?

Answer 1

Gift aid amount will increase the basic rate band.

So add:

BRB + (the amount of the gift x 100/80)

Question 2

How do you calculate tax borne on employment income if they are not a basic rate payer?

Answer 2

for Non-savings income multiply the BRB amount (34,500) by the basic rate, and the rest of the hgher rate by the higher rate amount, and so on.

For savings income, if they are a higher rate payer for e.g. it is all (the whole amounts) multiplied by the higher rate. This is the same as the additional rate.

Question 3

“The use of a company car; list price £46,000, CO2 emissions 174g/km. In addition to using the car the company also pay for all the diesel fuel, both private and business. Robert estimates that he uses the car 30% for private purposes.”

allowable expense under trading income? What adjustments are required?

what about the private use?

Answer 3

two things to add back

1. emission is 174 g/km. so look at table and round down to 170 g/km (ALWAYS ROUND DOWN). this gives you 35%. Add 4% (as its a diesel car) to this to get 39%. HOWEVER, the max you can get is 37% so use this. Then multiply 37% by the list price of the car. This gets ADDED BACK to employment income.
2. For the fuel, multiply the percentage calculated above by 23,400 (see tax tables).

PRIVATE USE HAS NO RELEVANCE

Question 4

“The use of a company flat in London. The company bought the flat in 2016 for £460,000 and Robert has had the use of it from that date onwards. The flat has an annual rateable value of £6,800 and has been furnished by the company at a cost of £37,000. In addition the company also pay all the utility bills which amounted to £2,700 in 2018/19. The accommodation is not classed as job related.”

allowable expense under trading income? What adjustments are required?

Answer 4

not job related so:

1. add back the rateable value of 6,800
2. add back: (flat cost - 75k) x national interest rate given.
3. Add back the furnishing cost x20%.
4. add back the utility bills of 2,700

Question 5

Free car parking space at work - allowable expense under trading income?

Answer 5

Allowable so dont need to add back.

Question 6

bonus rec’d?

Answer 6

add this to employment income

Question 7

“A £30,000 loan at 1% interest rate. Robert took out this loan from the company on 6 September 2017 and as at 5 April 2019 the full £30,000 was still outstanding”

allowable expense under trading income?

Answer 7

Add back:

loan amount x (national r rate - 1%)

Question 8

when would you not apply a personal allowance?

how do you work out how much PA to remove?

Answer 8

When income is above 123,700.

When above 100k, it reduces by 1£ for every 2£ above 100k.

Question 9

“The use of a company flat in London. The company bought the flat in 2016 for £460,000 and Robert has had the use of it from that date onwards. The flat has an annual rateable value of £6,800 and has been furnished by the company at a cost of £37,000. In addition the company also pay all the utility bills which amounted to £2,700 in 2018/19. The accommodation is not classed as job related.”

(460,000 - 75,000) x 2.5% is added back, why?

Answer 9

remove 75000 as a result of the “additional benefit for expensive accommodation”. This means that if it is worth more than 75000 you can remove it from the price, and then multiply by the official interest rate.

Question 10

“Annual gross salary of £40,000 (PAYE deducted at source £15,600)”

What is the last step of this question to work out the income tax payable?

Answer 10

remove 15600 from the income tax liability you calculated!

Question 11

what is the rateable value of a property?

Answer 11

a value ascribed to a domestic or commercial building based on its size, location, and other factors, used to determine the rates payable by its owner.

Question 12

what is the rateable value of a property?

Answer 12

it is the rent amount that would have been paid had it been let at the annual value.

Question 13

when are employees taxed on living accommodation?

Answer 13

when it is not job related.

Question 14

when is living accommodation seen as job related? and therefore not taxable.

Answer 14

1. The accommodation is necessary for the employee to do the job properly.
2. The accommodation is provided for the better performance of the employees duties and is customary (e.g. gamekeeper cottage)
3. Is needed because there is a special security threat to the employee (e.g. civil servants in sensitive posts)

Question 15

what are the two assessable benefits for all other accommodation?

Answer 15

1. basic rental benfit.

2. additional benefit for expensive accomodation.

Question 16

what is the basic rental benefit?

Answer 16

if employer owns property, is is the rateable value.

if employer is renting, the higher of the actual rent paid and the annual value

if the employee pays a contribution to the rent, this is removed from the rental benefit.

Question 17

additional benefit for expensive accomodation?

cost of living accomodation is?

Answer 17

benefit for expensive accomodation over the value of 75,000

calculated by:
(cost of living accom. - 75,000) x national interest rate)

the cost of the living accomodation is taken as the purchase price of the property plus any improvements made before the start of the tax year.

if property owned for more than 6 years use market value not cost fo accom.

Question 18

if employer furnishes accom, what allowance is avaliable?

Answer 18

20% times the market value of the furniture when it was first made available

Question 19

insurance, road tax and insurance on cars are paid by the employer. How are these dealt with?

Answer 19

Add these amounts to the taxable benefit and multiply by the percentage calculated.