Chapter 2 - Introduction to Employment Income and Benefits

Question 1

Basics

Answer 1

Legislation about employee taxation is in ITEPA 2003. Employee extends to office holders ie directors.
Employment income is remuneration in monetary and non-monetary form

Question 2

Net Taxable Earnings

Answer 2

Earnings less any allowable deductions under the expenses provisions within ITEPA 2003

Question 3

Receipts Basis

Answer 3

Employees are generally taxed on the receipts basis, For cash payments this means the earlier of the date the payment is physically made, or the date they become legally entitled to it.

Question 4

Non-Cash Receipts Basis

Answer 4

Date of receipt is the date the beNenfit is provided.

Question 5

Directors Receipts Basis

Answer 5

Date of receipt is the earliest of the two normal rules for employees or the earliest of:

a) the date his earnings are credited in the co accounts
b) at the end of the co AP if the earnings are determined by the end the end of the period; or
c) the date the earnings are determined if that date falls after the end of the AP

Question 6

Taxable Benefits

Answer 6

Majority of benefits are taxable in the hands of an employee. Some are exempt from tax. Tax will be due on a benefit that is provided either to the employee or to a member of his family or household

Question 7

Cash Equivalent

Answer 7

Taxable amount of benefit is called the cash equivalent. It’s the cost of the benefit less any part of that cost made good by the employee to the person providing the benefit.

Question 8

Cost of Benefit

Answer 8

The cost of the benefit is the cost to the employer of providing the benefit. It’s the marginal cost following the court case of Pepper v Hart