Chapter 4: Benefits Flashcards
When are benefits taxed?
Taxed when the benefit is provided
All benefits are time apportioned
Employees with a company car are taxed on a % of what:
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)
Non-hybrid cars - Calculating the %
Above 55g/km calculation
16% + ( (Co2 emissions rounded down to nearest 5% - 55) / 5 )
Non-hybrid cars - Calculating the %
Diesel cars not meeting RDE2 standard
Additional 4% added on to
16% + ( (Co2 emissions rounded down to nearest 5% - 55) / 5 )
Non-hybrid cars - Calculating the %
What is the % capped to
37%
Taxable benefits for non-hybrid cars with emissions below 50g/km is not examinable
Do not forget to time apportion car benefits as well
Happy days
Contribution to running costs of a car
Reduces taxable benefit
Time apportion unless the car is off the road for more than how many days?
30 days
Fuel benefit
Fuel for private journeys
Including home to work
Base figure= £27,800 * car percentage
Fuel
Time apportion?
Employee contribution?
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
Van benefits
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
Non-Job related Accommodation
The employer rents from 3rd party, the taxable benefit is the greater between:
The rent paid by the employer
Or
Annual Value
Non-Job related Accommodation
The employer owns the property
What is the additional charge?
Employee taxed on annual value
Additional charge if cost over £75,000
Additional charge is:
(Cost - 75000) x official rate of interest
If the employer owns the property
What is the cost for non-job accommodation?
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
If the employer owns the property
For Non-job related accomm , use the market value instead of cost when first provided plus improvements if :
If acquired more than 6 years before its first use by the employee
AND
Cost plus improvements cost more than £75000
Living exp
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
Job related accomm
EXEMPT
Job related if:
-Necessary or
-Improves performance and customary to provide or
-Provided for personal security
Directors can only claim the exemptions for job related accomm if:
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
Vouchers taxable benefit
Cost to employer
Also subject to ee&er NIC
nearly cash = taxable benefit
Loans taxable benefit
Average method
Strict method
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
In the exam, calculate both methods for the loan benefit and choose the lower unless told otherwise
Loans
Time apportion
Not taxable if:
w/off loans
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
Other assets for private use
Taxable benefit = 20% of the MV when first provided
Exclude bicycle provided for journeys to and from work are tax free
Other assets for private use if employee subsequently acquires the asset
The taxable benefit is the greater of
MV at time of employee acquisition
OR
Original MV - cumulative taxable benefit to date of employee acquisition (eg NBV)
