5. Employment income

Question 1

What basis of assessment is employment income on?

How does this effect when income is deemed to be received?

Answer 1

Receipts basis:

Individual:

• date entitled to payment
• date payment received

Director:

• date payment was credited in accounts
• if earnings are determined:
  
  • before end of period: last day of accounting period
  • after end of period: date of which earnings are determined

Question 2

When can travel expenses be claimed?

When is travel between home and work allowed? (3)

Answer 2

Necessarily, wholly and exclusively for business.

• Temporary workplace (less than 24 months)
• No usual place of work
• Usually works from home

Question 3

In terms of the AMAP allowance, in what circumstance is this given and when is it relevant?

Answer 3

Given to employees doing business miles in personal cars.

Relevant when checking employee benefits.
If payment received from employer > AMAP, excess is taxable benefit.
If payment received from employer < AMAP, shortfall is allowable deduction.

Question 4

The most common exempt benefits are (21)

Answer 4

• Trivial benefit (less than £50 and not work-related)
• Non-cash long service award (20+ years) allowance £50 a year
• Awards under staff suggestion scheme
• Employers contributions to occupational pension schemes
• Pension advice up to £500 a year
• On-site canteen facilities (when provided to everyone)
• Up to £150 per annum per head for social events
• Non-cash gift from third party (up to £250)
• Provision of a parking space
• Workplace buses/cycling equipment
• Workplace childcare
• One mobile phone (inc. private use)
• Work related training courses
• Job-related accommodation
• Relocation and removal up to £8000
• Working away overnight: £5 UK, £10 overseas
• Payment towards costs working from home (more than £6 a week need evidence)
• Up to £500 recommended medical treatment to return to work
• Provision of travel, accom and subsistence during periods of public transport disruption due to industrial action
• Beneficial loans less than £10,000
• Glasses and eye tests for those using VDUs

Question 5

What are the general rules for taxable benefits? (4)

Answer 5

• Usually considered at value of providing benefit to employee.
• Normally reduced by employee contributions
• Time apportioned if only available for part of year
• Detailed on P11D

Question 6

What is the general charge for company cars provided for private use? How do you determine both figures?

Answer 6

List price x Co2 %

List price: value of car when first bought (not price paid), plus any extras less employee contributions up to £5,000.

Co2%: 13/14% + ((XX - 95)/5) + 4% (if not RDE2). Capped at 37%.

Question 7

What other points are relevant when remembering company car use? (3)

Answer 7

• Time apportion if not available for more than 30 consecutive days.
• Can reduce by employee monthly payments
• No car benefit for genuine pool cars.

Question 8

What is the formula for company cars for fuel?

What is relevant to remember here? (2)

Answer 8

£24,500 x Co2%

• Can be time apportioned
• Cannot be reduced by employee contributions

Question 9

In terms of vans, what reductions can be made?

Answer 9

Same as car.

Use benefit can be reduced by employee contributions - fuel cannot.

Question 10

When an asset is provided to an employee, other than a vehicle, how do you determine the benefit?

Answer 10

Dependent on whether employee owns or rents asset.

Owned: 20% of market value = annual value
Rents: higher of annual value and rent paid

Both methods reduced by employee contributions.

Question 11

When an asset is gifted to an employee, how do you determine the taxable benefit?

What if the gift is a car, van or bike?

Answer 11

Gifted straight after purchasing, taxed at cost to employer.

Gifted after use: benefit is the greater of:

Market value when gifted X

OR

Market vale when first provided X
Less: benefit already taxed (X)

Note: if gift is car, van or bike, benefit is always at current market value.

Question 12

What is the proforma for non job-related living accom?

Answer 12

Basic charge X
Extra charge X
Living expenses X
Use of furniture X
Less: employee contributions (X)
= taxable benefit

Question 13

How do you determine charges on non job-related living accom.?

Answer 13

Employer bought:
Basic charge: annual value
Extra charge: (Cost - £75K) x ORI (2.25%)
Cost is MV if property owned for more than 6 years before moving in and includes capital improvements in previous tax years.

Employer rents:
Basic charge higher of annual value and rent paid.

Question 14

How do you charge living expenses and furniture in non job-related accom?

Answer 14

Living expenses: cost to employer less employee contributions
Furniture: 20% of value when bought.

Question 15

When is accom. job-related? (3)

What charges are available on job-related accom?

Answer 15

• Security
• Custom
• Necessary to job

Taxable benefit still on living expenses and furniture but capped at 10% of employee’s net earnings.

Net earnings: taxable employment income - living accommodation benefits

Question 16

How do you calculate beneficial loans benefit?

Answer 16

Average method:
Loan amount (start of year + end of year/2) x 2.25% X
Interest actually paid (X)

Strict method:
Loan amount x X/12 + Loan amount x X/12 x 2.25% X
Interest actually paid (X)

Question 17

When is there no taxable benefit on a beneficial loan? (2)

Answer 17

• Doesn’t exceed £10,000 throughout tax year

- Interest paid on loan would qualify for tax relief (e.g. interest on loan to buy plant and machinery for employment)

Question 18

What do you do when all, or part of a loan is written off?

Answer 18

Treat as benefit and add to taxable income regardless of amount.