Chapter 3 - 1.1 - Employment Income

Question 1

Define employment income

Answer 1

Employment income is money or money’s worth arising from employment and is taxed on a receipts basis

Question 2

What four things does the income taxed as employment income include?

Answer 2

• Salary
• Tips
• Bonus
• Taxable Benefits

Question 3

What does ‘taxed on a receipts basis’ mean?

Answer 3

Essentially that employees are taxed based on the income they actually receive, not when it is earned or promised. So, they pay taxes on money and benefits when they actually get them.

Question 4

Salary

Answer 4

Tax the gross amount received on every pay day in the tax year

Question 5

Tips

Answer 5

e.g service charges added to restaurant bills are taxable on the staff who receive a share of those tips

Question 6

Bonus

Answer 6

Deemed to be received on the earlier of the date on which:
- The bonus is paid
- The individual becomes entitled to payment

Question 7

What should you do if the benefit has only been provided for only part of the tax year?

Answer 7

Time apportion to the nearest month - Divide the total value of the benefit by the number of months in the tax year and then multiply by the number of months the benefit was actually provided, then round to closest month

Question 8

If an employer provides a benefit where there is no specific rule for calculating the benefit, what happens?

Answer 8

The employee is taxed on the marginal cost to the employer, less any contributions made by the employee