3: Employment Income Flashcards
What four things are included in Employment Income?
- Salary (gross amount)
- Tips
- Bonus (received on the earlier of when the bonus is paid, or the individual is entitled to payment. End of tax year is irrelevant information)
- Taxable benefits (always apportion)
What do you do with taxable benefits where there is no specific rule?
An employee is taxed on the marginal cost to the employer (so the cost of one extra)
MINUS any contributions made by the employee.
What is the taxable amount of vouchers?
For non-cash vouchers, or credit tokens (like credits cards), it is:
- cost to the employer, less any amount paid by the employee
For cash vouchers:
- amount for which the voucher can be exchanged
What are the conditions for trivial benefits?
A benefit is trivial when it meets all three of these requirements:
- cost of benefit does not exceed £50
- it is not cash or a cash value
- it is not provided in recognition of services
What are the 10 key exempt benefits?
Free/subsidised canteen
Health screening and medical check up (1pa)
Bicycles and cycling safety equipment
Car parking space at/near work
Employer’s pension contributions
Mobile phone (1 per employee)
£150pa for social events. More than this, all is taxed
Insignificant use of computers
Removal and relocation expenses of up to £8,000
Job-related accommodation
What are the conditions of ‘job-related’ accommodation?
Necessary for performance of duties ie. level-gate keeper
Customary to be provided, ie. prison governor
Provided for security, ie. soldier barracks
When will a director qualify for job-related accommodation?
Director owns no more than 5% shares in the company
The director is a full-time working director (unless the company is a charity/NFP)
What are the six taxable benefits?
Vouchers
Living accommodation
Cars for private use (petrol/diesel/hybrid)
Private fuel
Vans
Assets for private use (owned/rented)
What is the GOLDEN RULE for calculating all taxable benefits?
Time apportion
Deduct employees contributions (apart from for private fuel)
How do you calculate taxable benefit for RENTED accommodation?
Higher of:
- annual value
- rent paid by the employer
How do you calculate the taxable benefits for accommodation OWNED by the employer?
House under £75k: just annual value
House over £75k:
Annual value
PLUS
(‘Cost’ - £75,000) x 2.25
What is ‘cost’, when calculating the value of owned accommodation?
Generally: original value of property
If employer owned for more than six years before employee moved in,
the MARKET VALUE at date the employee moved in is used instead
+
Any capital improvements made between the ‘cost’ date and up to the start of the tax year in the question. NOT this tax year!
Are living expenses in private accommodation (heating, lighting etc) also a taxable benefit?
Yes!
Cost to employer less any employee contributions
How to calculate the benefit of cars provided for private use?
List price - Co2 emissions%
For Co2 emissions:
(Rounded down emissions) - 75
——————————————-
5
Add back on 20
A cap of 37%
What’s the cap on emissions percentage for any car?
37%
