Chapter 4: Benefits

Question 1

When are benefits taxed?

Answer 1

Taxed when the benefit is provided

All benefits are time apportioned

Question 2

Employees with a company car are taxed on a % of what:

Answer 2

The list price
+
Any optional accessories originally provided with the car
+
Any further accessories provided later(costing £100 or more)
-
Capital contributions by employees up to £5000

(Ignore discounts)
(Do not confuse capital contributions with contributions towards the running cost)

Question 3

Non-hybrid cars - Calculating the %

Above 55g/km calculation

Answer 3

16% + ( (Co2 emissions rounded down to nearest 5% - 55) / 5 )

Question 4

Non-hybrid cars - Calculating the %

Diesel cars not meeting RDE2 standard

Answer 4

Additional 4% added on to

16% + ( (Co2 emissions rounded down to nearest 5% - 55) / 5 )

Question 5

Non-hybrid cars - Calculating the %

What is the % capped to

Answer 5

37%

Question 6

Taxable benefits for non-hybrid cars with emissions below 50g/km is not examinable

Do not forget to time apportion car benefits as well

Answer 6

Happy days

Question 7

Contribution to running costs of a car

Answer 7

Reduces taxable benefit

Question 8

Time apportion unless the car is off the road for more than how many days?

Answer 8

30 days

Question 9

Fuel benefit

Answer 9

Fuel for private journeys
Including home to work

Base figure= £27,800 * car percentage

Question 10

Fuel

Time apportion?
Employee contribution?

Answer 10

Time apportion - YES

Employee contribution to fuel - DOES NOT REDUCE TAXABLE AMOUNT

Therefore better to contribute towards running costs

If employee pays for all the fuel - there is no fuel benefit

Question 11

Van benefits

Answer 11

Fixed taxable benefit of £3960, additional £757 is fuel benefit

No benefit for a van if the private use is insignificant

Travel from home to work does not count as private use

0% emission van = 0 benfit

All given in exam

Question 12

Non-Job related Accommodation

The employer rents from 3rd party, the taxable benefit is the greater between:

Answer 12

The rent paid by the employer

Or

Annual Value

Question 13

Non-Job related Accommodation

The employer owns the property

What is the additional charge?

Answer 13

Employee taxed on annual value

Additional charge if cost over £75,000

Additional charge is:

(Cost - 75000) x official rate of interest

Question 14

If the employer owns the property

What is the cost for non-job accommodation?

Answer 14

Cost of acquisition + capital improvements taken place prior to the start of the fiscal year

Ignore improvements in the current tax year
Don’t confuse improvements and repairs

Question 15

If the employer owns the property

For Non-job related accomm , use the market value instead of cost when first provided plus improvements if :

Answer 15

If acquired more than 6 years before its first use by the employee

AND

Cost plus improvements cost more than £75000

Question 16

Living exp

Answer 16

Living exp paid by employers is a taxable benefit

Decorating is taxable in the year the work is done

If accomm is job related, benefit is capped to a maximum of:
-10% of the employee earnings and other (non-accomm) benefits

Question 17

Job related accomm

Answer 17

EXEMPT

Job related if:
-Necessary or
-Improves performance and customary to provide or
-Provided for personal security

Question 18

Directors can only claim the exemptions for job related accomm if:

Answer 18

They do not have more than 5% interest in the company
AND
Either they are full time working directors or the company is non-profit making or a charity

Question 19

Vouchers taxable benefit

Answer 19

Cost to employer

Also subject to ee&er NIC

nearly cash = taxable benefit

Question 20

Loans taxable benefit

Average method
Strict method

Answer 20

Taxable benefit = loan * official rate of interest - actual interest paid in the year

Average method = (opening loan + closing loan) / 2

Strict method = calculate interest on a monthly basis

Average method used unless an election is made to use the strict method

Strict method used if taxpayer or HMRC wish

Question 21

In the exam, calculate both methods for the loan benefit and choose the lower unless told otherwise

Question 22

Loans

Time apportion
Not taxable if:

w/off loans

Answer 22

Time apportion - YES

Not taxable if under £10000 throughout the year

If exceeds 10000 at any time in the year, whole benefit is taxable

If loans are w/off whether over or under 10000 is always taxable

Question 23

Other assets for private use

Answer 23

Taxable benefit = 20% of the MV when first provided

Exclude bicycle provided for journeys to and from work are tax free

Question 24

Other assets for private use if employee subsequently acquires the asset

The taxable benefit is the greater of

Answer 24

MV at time of employee acquisition

OR

Original MV - cumulative taxable benefit to date of employee acquisition (eg NBV)