Chapter 3 - Employment Income Flashcards
What is Employment income?
Money from employment that is taxed on a receipts basis
What type of income is included in employment income
- Salary
- Tips
- Bonus
- Taxable benefits
What’s a taxable benefit?
Employee is taxed on the marginal cost to the employer minus any contributions by the employee
in other words, they pay at cost minus anything else they’ve contributed
What are non cash vouchers and how are they taxed?
A voucher or card exchangeable for goods or services e.g. a book token
Taxable amount is the cost to the employer minus anything the employee paid
What are cash vouchers and how are they taxed?
Voucher or card exchangeable for cash
Amount that the voucher is exchanged for is taxed
What are credit tokens and how are they taxed?
Usually a credit card that can be used to obtain money, goods and services
Cost to the employer minus any amount paid by the employee
What are trivial benefits?
Described as small ‘token gifts’, employees receive from managers.
What’s defined as a trivial benefit?
Cost of it is not more than £50
It’s not a cash or cash voucher
It is not provided in recognition of services
What are the list of 23 exempt benefits?
- Free Canteen (Available to All)
- Sports facilities (for employees)
- Workplace nurseries/childcare
- One free health screening and medical check-up
- Glasses and eye tests for employees who use DSE
- Up to £500 for medical treatment to help employee return to work
- Use of bicycles if available for all
- Work busses and subsidies for public services
- Vehicle battery charging facilities
- Car parking space
- Employer’s contribution into a registered pension scheme
- Pension advice and tax planning up to £500
- Mobile phone (one per employee)
- Work related training courses
- £150 p.a per head for socials - If it costs more than £150 then the entire amount is taxable
- Non-cash service awards less more than 20 years experience maximum £50
- Awards up to £5,000 under staff suggestion scheme
- Non-cash gifts from third parties (up to £200 per donor) or entertainment provided by third party (no limit)
- Removal expense up to £8,000
- Payment towards cost of working at home £6 p.w)
- Personal incidental expenses when working away from abroad up to £5 a night in UK and £10 abroad. If limit exceeds the whole thing is taxable.
- Job-related accommodation.
When can the director qualify for tax exempt job related accomodation?
When the director owns no more than 5% of shares in company
When the director is full-time working director
What’s the flat rate charge for vans?
£3,960 also provided in tax table i beleive
What’s the flat rate benefit for vans for fuel private use company van
£757
What happens if the employee pays the employer for the fuel in full
no taxable benefit
If the employer gives out furniture or something similar. What is the taxable benefit if the employer owns the asset?
Benefit = Annual value: 20% x market value when first provided for private use
If the employer gives out furniture or something similar. What is the taxable benefit if the employer
benefit = higher of
- annual value
- rent paid by employer
When should the employer submit information regarding PAYE info
On or before the day the employee is paid using a full payment submission
What is a Employer Payment Summary
A form that employers use to report to HMRC about payments made to employees and any deductions taken from their wage
When might an Employer Payment Summary be required?
If the employer reclaims
> Statutory maternity, paternity or adoption payments
> Employment allowance
How is benefits processed under voluntary payroll and what is voluntary payroll
Voluntary payrolling in the UK lets employers tax employee benefits through payroll each month instead of via end-of-year forms, making it simpler and more transparent for both parties.
It’s done by using the cash equivalent
[only for this exam] what’s the one benefit that an employee cannot process through payroll?
Accomodation
What is included in a P60
Gross Pay
Tax Deducted
NICs paid by both employee and employer
What’s the deadline to supply P60 to each employee?
31 May following the end of the tax year
What’s.a P11D?
A form where employer provides details of benefits provided to each employee during the tax year
What’s the deadline for a P11D?
6th July following the end of the tax year
