1 - Income Tax (G)

Question 1

Define ‘employee benefit’

Answer 1

Any type of non-monetary compensation

Question 2

What forms do employers need to complete if employee benefits are not payrolled?

Answer 2

P11D

Question 3

Are employee benefits taxable?

Answer 3

Yes

Question 4

Employees are taxed on the cash equivalent of a benefit rather than on its second-hand value. How does an employer define the cash equivalent value?

Answer 4

Broadly the cost to the employer of providing the
benefit - this can sometimes be less than what it’s worth (the second hand value), where the employer may have bought it in bulk

Question 5

What did Pepper v. Hart (1992) decide?

Answer 5

That the taxable benefit for an employee on in-house benefits provided by an employer is based on the marginal cost only.

Question 6

How is the cash equivalent calculated on an asset that is used the employee, that’s not a motor car or accommodation)?

Answer 6

– the ‘annual value’ of the use of the asset; plus
– any expenses incurred by the employer in maintaining the asset.

Question 7

How is the annual value of a usable asset calculated?

Answer 7

The annual value is taken as 20% of the market value of the asset when it was first provided to the employee.

Question 8

How is the benefit calculated if a car is provided to an employee or member of their family for private use?

Answer 8

As a percentage of the list price of the car, which is based on a level of a car’s carbon dioxide (CO2) emissions

Question 9

What taxable benefit charge (%) is applied on cars that can only be driven in zero-emission mode?

Answer 9

2%

Question 10

What is the supplement on diesel cars that do not meet the Real Driving Emissions 2 (RDE2) standard?

Answer 10

4%, except for diesel hybrids

Question 11

What are the percentage charges for petrol-powered cars with CO2 emissions of 51 g/km or more?

Answer 11

Remember 51 - 54 @ 15%
Then for column 1, 55 and increase in multiples of 5 to 160
Then for column 2, increments of 1% each time, with the last one being “over”

51 to 54 15%
55 16%
60 17%
65 18%
70 19%
75 20%
80 21%
85 22%
90 23%
95 24%
100 25%
105 26%
110 27%
115 28%
120 29%
125 30%
130 31%
135 32%
140 33%
145 34%
150 35%
155 36%
160 and over 37%

Question 12

Which type of cars are taxed by reference to current market value and not their original price? And what are the percentages an bands?

Answer 12

Classic cars aged 15 years or more at the end of the tax year, and with a value of £15,000 or more:
15% (0 to 1,400cc)
22% (1,401 to 2,000cc)
32% (over 2,000cc)

Question 13

Why is the use of a pool car not a taxable benefit?

Answer 13

Such a car is defined as a car that is
available to more than one employee and is not usually kept overnight at an employee’s
home. Furthermore, any private use should be only incidental to the business use.

Question 14

What is the 2023/24 fuel benefit charge?

Answer 14

£27,800

Question 15

When is fuel benefit not provided?

Answer 15

1. When no fuel is provided
2. When fuel is provided for business use
3. Cost of private fuel is fully reimbursed by the employee

Question 16

If travelling to a temporary place of work, is this classed as personal or business travel?

Answer 16

Business

Question 17

If travelling to a usual place of work, is this classed as personal or business travel?

Answer 17

Personal

Question 18

What are the taxable benefits for company vans?

Answer 18

£3,960 (nil for zero emission vans)
Plus £757 when van fuel is available for private journeys

Question 19

What is the official rate of interest for taxation of beneficial loans?

Answer 19

2.25%

Question 20

When is the benefit of interest free or ‘cheap loans’ from an employer, not taxable?

Answer 20

When it does not exceed £10,000

Question 21

Where an employee occupies rent-free accommodation or pays only a very low rent, there is
generally a tax charge on the benefit.

How is the taxable benefit assessed and would an additional charge be incurred?

How is the additional charge calculated?

Answer 21

First assesed on the annual value (annual rent expected from a normal market), or rent actually paid by employer, if higher

Additional charge is applied if the property value is over £75,000 and owned by the employer.

The value is then multipled by deducting it from £100,000 and multiplying it by 2.25% which is the 2023/24 official rate of interest.

i.e., if property cost is £100,000, then £100,000 - £75,000 = A. Then A x 2.25%.

Question 22

In which 3 circumstances can an employee avoid being taxed on the benefit of living accommodation? And which 2 of the 3 circumstances can directors who own more than a 5% share in the company, NOT claim?

Answer 22

1. Necessary for the employees duties i.e., caretaker
2. Helps the employee perform their duties better i,e., publican
3. Special threat to employees security

Directors cannot claim 1 and 2

Question 23

If an employer provides furnishing and equipment in living accommodation, what is the tax benefit charge?

Answer 23

20% market value

Question 24

What type of income are cash vouchers treated as for tax purposes?

Answer 24

Earnings

Question 25

When is an employee assessed for tax upon use of a company credit card (company token)?

Answer 25

The date they use the card

Question 26

What is the annual exemption amount per employee for recommended medical treatment paid by the employer, to help employees return to work?

Answer 26

£500

Question 27

Are medical examinations and screening costs, funded by the employer, taxable?

Answer 27

No

Question 28

Name as many potentially tax free “benefits” (12)

Answer 28

• group income protection (IP);
• the provision of meals;
• mobile phones;
• long service awards;
• suggestion schemes;
• work-related training;
• relocation and removal expenses;
• home-working;
• workplace nurseries;
• liability insurance;
• pension advice; and
• trivial benefits.

Question 29

An employee is not taxed on the provision of a Christmas party, or similar annual event, provided the cost is not more than how much?

Answer 29

£150

Question 30

When do mobile phones given to employees become a taxable benefit?

Answer 30

When they have more than one

Question 31

When do long service awards become taxable?

Answer 31

When the award if worth more than £50 per year they have worked (20 years for long service), and the employee has not received a similar award in the last 10 years.

Question 32

When does a suggestion scheme become a taxable benefit?

Answer 32

When the employee is paid over £25, if the suggestion has some merit and is outside of the employees usual duties.

Question 33

When is a large award of up to £5,000 under a suggestion scheme, not taxable to the employee?

Answer 33

When the suggestion is implemented and;

The award is not more than 50% of the net financial benefit of the suggestion to the employer in the first year, or 10% of the net benefit over five years.

Question 34

What type of workplace training is generally classed as a tax free benefit? (2)

Answer 34

H&S and first aid

Question 35

What is the tax free amount of benefit for relocating an employee or funding their removal expenses, where the employer makes this necessary for them to perform their duties?

Answer 35

£8,000

Question 36

How much tax relief can you claim as an employee working from home and for what?

Answer 36

£6 a week
Business calls, gas and electricity
Not for broadband

Question 37

What is the tax exemption amount for pension advice to employees?

Answer 37

£500

Question 38

Michael makes a contribution of £9,000 towards his new company car. What amount is deducted from the list price before calculating the benefit?

Answer 38

£5,000

Chapter reference: 1G2B.

Whilst an employee is able to make any contribution towards the capital cost of a car, only £5,000 is deducted from the list price of the car. Any excess over £5,000 is ignored for tax purposes.