Benefits In Kind

Question 1

Benefits in kind

Answer 1

• Employment income received in the form of goods or services rather than money
• income tax is charged to employee at the cost to the employer of providing the benefit

Question 2

Trivial benefits

Answer 2

• BIK <£50 are exempt from income and NICs
• Does not apply to cash or cash vouchers or benefits in recognition of a particular service
• cannot be used to exempt part of a benefit
• capped at £300 per tax year for directors of a close company

Question 3

Living accommodation - employer owns property provided to employee

Answer 3

basic taxable value is the ‘annual value’

Question 4

Living accommodation - employer rents property provided to employee

Answer 4

taxable benefit is the higher of:
1. annual value of the property
2. rent paid by the employer

Question 5

when is the taxable benefit reduced for living accommodation

Answer 5

reduced by any contribution made by the employee

Question 6

What happens if the property cost the employer more than £75,000

Answer 6

• increase in taxable benefit if the property cost the employer more than £75,000
• Apply official rate of interest to amount by which the cost of accommodation exceeds £75,000

Question 7

how is the cost of the property calculated?

Answer 7

• purchase price + cost of improvements - capital contribution made by employee
• if the house has been owned by employer for ore than 6 months, market value is used

Question 8

What happens if the living accommodation is job related?

Answer 8

• no taxable benefit if accommodation is:
  1. necessary for job performance
  2. provided for better performance
  3. provided for security reasons

Question 9

Ancillary services

Answer 9

• Employee taxed on any ‘ancillary services’ such as heating, lighting, cleaning.
• if accommodation is job related, taxable benefit cannot exceed 10% of employee’s net earnings (total income-deductible expense)

Question 10

Assets loaned to employees

Answer 10

• taxed 20% of market value
• scaled down if the asset is not used for whole year

Question 11

how is the asset loaned to an employee taxed if it is then given/sold to them?

Answer 11

taxed on the higher of:
1. market value of asset when first loaned - taxable benefits - amount paid for the asset
2. market value on date of transfer - amount paid by employee

Question 12

cars provided for private use

Answer 12

• employee taxed based upon the list price when new (minus capital contributions up to £5,000)

Question 13

how is the taxable benefit calculated for cars provided for private use?

Answer 13

• apply a percentage to the car’s list price
• % depends upon the car’s emission rating
• benefit reduced if car isn’t made available for 30+ consecutive days
• amounts paid by employee towards costs reduces taxable benefit

Question 14

Fuel provided for private use

Answer 14

• calculated using same percentages as taxable car benefit
• benefit is not reduced for any partial contribution

Question 15

Van benefit

Answer 15

• taxable benefit is £3,960
• private fuel creates additional taxable benefit of £757
• charges are reduced if not provided for whole tax year

Question 16

Beneficial loans

Answer 16

• granted by an employer either interest free or at an interest rate below the official
  -taxable benefit: difference between interest at the official rate and the interest payable
• no taxable benefit if the total amount of beneficial loans does not exceed £10,000

Question 17

Beneficial loans which vary, normal method

Answer 17

amounts. of the loan at the start and end of tax year are averaged and multiplied by the average official rate for the year

Question 18

Beneficial loans which vary, alternative method

Answer 18

interest at the official rate is calculated precisely on the day-to-day outstanding balance

Question 19

Salary sacrifice

Answer 19

• employee gives up part of their salary for a BIK
• benefits such as pension,childcare , cycle to work and car with emissions <75g/km are excluded

Question 20

taxable benefit for salary sacrifice

Answer 20

the greater of:
1. value of benefits calculated in the normal way
2. amount of salary that’s been sacrificed