Ch4: Taxable and Exempt Benefits: The PAYE System Flashcards
(1) Accommodation (2) Private Use of Employers Assets (3) Company Cars, Vans and Fuel (4) Interest-Free Loans (5) Exempt Benefits (6) PAYE
What is meant by Job-Related Accommodation?
- Provided for security reasons.
- Necessary for the performance of duties.
- Customary and ensures better performance of duties.
How to calculate when you are provided with accommodation and it is NOT Job-Related?
NOT Job Related -
GREATER OF
(a) Annual Value
(b) Rent paid by ER
NOT Job Related & Property Costs OVER £75,000 -
[ (Cost - £75,000) * 2.25% (Rate of Interest) ]
Property is made available to the EE 6+ YEARS AFTER ER PURCHASED IT = Use MV, instead of cost.
How to calculate Private Use of ER’s Assets?
HIGHER OF:
(a) 20% of the MV when first provided [TIME APPORTIONED]
(b) Rental Paid by ERs.
What is the proforma to calculate TAXABLE BENEFITS of property income?
Annual Value
LESS Rent Paid by ER
EQUALS
Additional Amount [ (Cost - £75,000) * 2.25% ]
EQUALS Taxable Benefit
What to do if the Asset is Gifted to the EE?
HIGHER OF:
(a) MV when given.
(b) MV when first provided LESS Taxable Benefits up to the Date of Gift.
How to calculate Annual Benefit for Company Cars?
Annual Benefit = CO2 % x List Price of Car
- Gets pro-rated.
- Include optional extras.
- List Price and NOT Price Paid.
What is the maximum amount of Capital Contributions?
£5,000
How much Fuel gets provided for Company cars?
% of £27,800
What is the formula for working out Car Benefit?
16% + [ (CO2 - 55) / 5 ]
Always ROUND DOWN the CO2 amount to the NEAREST 5.
Maximum % = 37%
Diesel Cars that DO NOT MEET RDE2 STANDARDS = 4% supplement.
How to calculate Company Vans Benefits?
ZERO CO2 Emission Van = 0% benefit.
CO2 > 0 = £3,600 per year for EE with private use.
No benefit = EE takes the vans home
Private Fuel = £757 additional charge.
Formula for calculating Interest Free Loan.
Taxable Benefits = (Average Loan x 2.25%) - Interest Paid
Loans GREATER THAN £10,000
Explain the two methods used to calculate Average Loan?
(a) Average Method
[ ( Loan Outstanding at the Beginning of the TY + Loan Outstanding at the End of the TY ) / 2 ] * 2.25%
(b) Strict Method
Balance at the END OF EVERY MONTH within the period [TIME APPORTION]
Provide examples of Exempt Benefits.
- Free Canteen Meals.
- Medical Treatment not taxable up to £500 per EE if they are unable to work for roughly 28 days.
- Workplace Childcare.
- Qualifying Removal Expenses - max £8,000.
- Car Parking for Work.
- Contributions by an ER to a Registered Pension Scheme.
- Staff Parties - max £150 per person.
- Sport and Recreational Facilities
- Outplacement Counselling Services to EE who were made redundant.
- Weekly tax-free £6 WFH allowance.
- <£50 Trivial Benefits (NOT Cash/Cash Vouchers)
- Pension Advice - <£500 per EE per TY.
- Workplace Charging Point
- 1x Mobile Phone
- ISA, NS&I, Premium Bond Prizes.
What are some of the ERs duties for PAYE?
- Deduct income tax from the pay of EEs.
- Calculate amount of NIC that should be deducted.
- Keep a record of EEs pay and deductions.
- Must send income tax and NIC information to HMRC ELECTRONICALLY every time EEs are paid.
- Make their monthly PAYE payments on the 22nd.
What happens if the ERs make late payments?
- 1st late payment = No penalty
- Thereafter:
1-9 EE = £100
10-49 EE = £200
50 -249 = £300
250+ EE = £400 - Submission 3+ months late = 5% penalty.
