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) 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.
