Chapter 2: Employment income (other benefits, exempt benefits, allowable deductions))

Question 1

Vouchers

Answer 1

Cash Voucher: benefit = value of voucher

Non-cash: Benefit = cost of the voucher

Only cash vouchers are vouchers which can be exchanged for cash

Question 2

Loans (over 10,000)

Below 10,000 are exempt

Answer 2

Benefit = diff between interest actually paid and interest of ‘official rate of interest’

Question 3

Average method for loans

Answer 3

(average loan x official rate of interest x n/12) - less interest actually paid

Use amount of the loan at the start of the year or if earlier the start of the loan

Question 4

Exempt benefits :

Gifts and entertaining

Answer 4

Non-cash gifts from someone other than the employer, over £250 per year

Annual staff parties, if under £150 per head

Non-cash long service awards, over 20 years service, up to £50 pound per head

Question 5

Allowable deductions

Answer 5

Wholly, exclusively and necessarily business related

Question 6

Allowable deduction - occupational pension scheme

Answer 6

Directly deducted from employee’s salary under ‘net pay arrangement’

Contributions are gross and are sent directly into the company pension scheme, then tax is calculated after pension has been deducted giving full tax relief at source

Question 7

Allowable deduction - charitable donation

Answer 7

Not to be confused with Gift AID

GAYE

deduction made before PAYE

Question 8

Allowable deduction - qualifying travel expenses

Answer 8

For business use

travelling to temporary place of work - less than 24 months before returning to normal place of worl

Question 9

Allowable deduction - qualifying travel expenses

Answer 9

For business use

travelling to temporary place of work - less than 24 months before returning to normal place of work

Question 10

Allowable mileage rates

Answer 10

Own vehicle for business travel

In ref material

Question 11

Allowable deduction - entertaining and subsistence

Answer 11

Entertaining of clients are only allowable if reimbursed by the employer

Question 12

Tax planning examples

Answer 12

-take adv of exempt benefits
-choose cars with lower emissions
-Repay all private fuel or none at all
-do not contribute more than £5000 towards the list price of a car
-take adv of allowable deductions such as pensions
-increase benefits in kind as opposed to salary or bonuses as there is no NI contributions payable

Question 13

Taxing employment income

Answer 13

Non-savings income

Question 14

Incidental expenses if exceeds the limit

Answer 14

If exceeds the limit all of it is taxable