Chapter 5&6 Flashcards
When are individuals normally taxed on their money earnings
Earlier of
Date of receipt
Date when the employee becomes entitled to the benefit
When are directors taxable on their money earnings
Earliest of
Payment date
Date when they became entitled to payment
Date earnings accrued in company accounts
End of a period of account if earnings for that period are determined before the period ends
Date earnings are determined if the amount is not determined until after the end of the period of account
What are 6 expenses allowable against employment income
Employee contributions into OCCUPATIONAL pension schemes
Relevant professional subscriptions if paid my employee
Allowable travel costs paid by employee
Deficits on mileage allowances
Charitable payments under the payroll deduction scheme
Any other expenses incurred wholly, exclusively and necessarily for the purposes of employment
What are the 3 instances traveling between work and home is an allowable expense
An employee has no normal place of work, travel from home to work is allowable
Where it can be shown a taxpayers home is his work location, then travel to another work location is allowable
Where an employee works at a temporary workplace for no more than 24 months, travel from home to temporary workplace during that period will be allowable (whole expense not excess)
How can you claim statutory mileage allowances
Can you claim for an employee in the car
If an employee makes business journeys in their own vehicle then employer can pay a tax free allowance up to a statutory amount
Yes, an employer can pay up to 5p per mile for each fellow employee in the car
What are the statutory approved mileage allowances for
Cars
Motorbikes
Bicycles
Car
45 pence per mile up to 10,000 miles
25 pence per mile over 10,000 miles
Motorbike
24 pence per mile
Bicycle
20 pence per mile
What are the 3 types of vouchers employees are taxable on
Cash vouchers
Credit tokens
Vouchers exchangeable for goods and services
What are the 3 conditions for job related accommodation to NOT be a taxable benefit
Necessary
Improves performance and customary to provide
Provided for national security
If employer owns the property:
How do you calculate the taxable benefit on non job related accommodation benefit
What is ‘cost’ made up of
What can cost be replaced with
Taxable benefit = annual value + [(cost-75k)*2%]-employee contributions
‘Cost’= purchase price + capital improvements made before the start of the current tax year
Cost is replaced with market value when the employee first moved in (+ subsequent improvements) if the property was acquired > 6 years before it was first used by the employee
If an employer rents property from 3rd party:
How is the taxable benefit calculated
Taxable benefit = higher of (annual value, rent paid) - employee contributions
How are living expenses taxed
What is the cost based off
What happens if the cost is job related
All living expenses eg electricity and including repairs and decoration are taxable benefits
It is the cost to the employer
Benefit is restricted to a maximum of 10% of the employees earnings and other non accommodation benefits
How do you calculate the taxable benefit on a private use car
Taxable benefit = (list price - capital contribution) * co2% - running cost contribution
Capital contribution capped at 5k
How much do you add if a car does not meet the standards of RDE2
What is the max CO2 percentage
4%
37%
How do you work out the taxable benefit on private fuel
25300 * CO2 %
No reduction for employee contribution
What is the taxable benefit for vans
What is the taxable benefit for zero emission vans
What is the additional private fuel benefit
3600
0
688
What is the taxable benefit for an asset made available for private use
What happens if the employee subsequently acquired the asset
When do you multiply by private use percentage
Taxable benefit= 20% of market value when first provided
Additional taxable benefit greater of
Market value at time of acquisition
Original MV less any taxable benefit for employee to date
When the private use is significant
How do you calculate BIK for a cheap loan
Is there a minimum loan value to gain a BIK
Taxable benefit = loan value * 2% - actual interest paid
Total of all loans must be below 10,000 throughout the year to not create a BIK
What are the 2 ways of calculating the loan value
Which value do you use
Strict method : calculate interest @ 2% month by month on the outstanding balance
Average method : loan value = (open bal + close bal) / 2
Time apportion if loan was only outstanding for a portion of the year
Use lowest of two values
What are the 10 most common exempt benefits for employment income
Contributions by employer to pension
Trivial benefit less than £50 (not cash or voucher)
Childcare facilities run by or on behalf of employer
One mobile
Free or subsidized meals in canteen which are available to all staff
Provision of parking space
Sports and rec facilities available to employees generally
Working from home expenses up to £6 per week
Personal incidental expenses whilst employee required to stay away overnight on business up to £5 per night UK and £10 per night abroad
Reasonable removal expenses max 8000 for new employment position or relocation
What are the 9 badges of trade
Intention to make a profit
Number of similar transactions - high number of transactions suggest trading
Nature of the asset - resale at a profit (trading)
Connection with existing trade - suggests trading
Changes to the asset - enhance marketability suggest trading
Reasons for sale - forced to sell (capital)
Source of finance - borrow to buy (trading)
Period of ownership - shorter period (trading)
Method of acquisition - acquisition by inheritance (capital)
When does a change of accounting period get accepted by HMRC
If it is within the first 3 years of trading
Or trader must notify HMRC of change of accounting date by 31 Jan following the end of the tax year change
