Chapter 2: Employment income (Car and van benefit) Flashcards
Employed versus self-employed (employment status)
Employee - taxed on employment income
Self-employed - taxed on trading profits
Employment status for employees and self-employed, contract …
Employee - contract of service
Self employed - contract for services
Features of employment relationship
-Employer is under obligation to offer work to the individual
-Employee is under obligation to carry out work for the employer
-Committed to working specified number of hours at fixed times and places. Individual cannot choose his or hers hours of work and where it will be completed
-Employee must do the work himself
-Employee has no financial risk
-Employer provides equipment
-Sick days and holiday days are paid
Earnings received from employment
Money earnings - examples salaries, wages, commissions etc
Taxable benefits - benefits provided by the employer, Example private use of car
For employees - when is income taxed in the fiscal year
Earlier of the date of payment and the date of entitlement arises
For director - when is employment income treated as:
Earliest of the following:
-Date of payment
-date of entitlement
-date the amount was credited in the company’s accounts
-End of company’s period of account, if the amount has been determined by then
-The date the amount is determined, if after company’s period of accounts
Employment income consists of:
Gross income received in tax year PLUS the assessable value of the benefits less allowable deductions
Assessable benefits or benefit in kind
Refers to any rewards an employee receives as part of their employment which is not received in money form.
Employees are taxed on the assessable value of the benefits provided by their employer.
Benefits are disclosed on either an employee’s P11D form each year which is submitted by the employer to HMRC, or included and taxed within payroll (tax collected using PAYE)
Car Benefit
List price x relevant %
List price - what the car was sold for brand new
What affects the List Price of a car
IGNORE DISCOUNTS
Capital contributions up to £5000 by the employee reduces the list price
Be careful with contribution to running costs - it is deducted from the value of the benefit
Scale charge percentage
Is which the list price is multiplied by to get the car benefit
Depends on CO2 emissions
In ref material
Scale charge percentage - additional info
Maximum percentage is 37%
If the employee makes a contribution towards running costs (contribution of private use), there - this can be deducted from taxable benefit
Only business use - no benefit, commuting to and from work is considered business use
No taxable benefit if company car is a pool car
Pool car
used by one or more individuals
Private use is incidental
Not kept overnight at or near home of an employee
Hybrid cars - scale charge percentage
Will have a emission level so calculate as normal
Where accessories and modifications are added to a car:
Add to list price
Does not apply for disabled use
Accessories added later are included in the list price, provided their cost is more than £100
