Chapter 5 - EP'T Income - Exempt Benefits, Living Accom Flashcards
Employment vs Self Employment
H - Hours usually run for a long period of time and specific
I - Intergration, carries out important activities for the firm
S - Source. Self employed = multiple sources
C - Control
H - Holidays = statutory rights, sick and paternity pay
O - Mutual obligation to carry out and and be offered work
R - Risk/Reward
E - Equipment provided
S - Substitution - less so in employment
Tax advantages of self employment
NIC rates lower for self employee
Tax/PAYE - Self-employed pay later
Expenses - rules for deduction more generous for self employed
Employment Income Proforma
Salary X
Bonus/commission X
Benefits X
Reimbursed expenses X
Cash vouchers X
Balance X
Less: Allowable deductions
Expenses incurred wholly, exclusively and necessarily Subtract X
Contributions to employer’s occupational pension scheme Subtract X
Subscriptions to professional bodies Subtract X
Charity donations: payroll deduction scheme Subtract X
Travel and subsistence expenses Subtract X
Use of own car – mileage allowance Subtract X
Employment income X
Charitable donations: if payroll deduction scheme not mentioned, just extend the band, don’t deduct
Basis of assessment
Date of Entitlement to payment
Date of Payment
Basis of assessment: Director’s earnings
Date of Entitlement to payment
Date of Payment
Date of which earnings are credited?
Earnings determined date??
Ignore daof entitlement, it’s the last of the accounting period
Exempt Benefits: Travel
Provision of a car parking space at/near place of work.
Work buses and subsidies to use public bus services.
Use of bicycles (and cycling safety equipment) if available to all employees.
Provision of travel, accommodation and subsistence during public transport disruption caused by industrial action. Or just normal…
Workplace charging for electric and hybrid cars.
Personal incidental expenses when working away from home up to £5 per night in the UK and £10 when working abroad. If the limit is exceeded the whole payment is taxable.
Provision of job-related accommodation (covered in more detail later in this module).
Exempt Benefits: Medical
Glasses and eye tests for employees who use VDUs
Up to £500 p.a. for recommended medical treatment to help the employee return to work.
Medical premium - covered
Exempt Benefits: Financial
Employer’s contributions into a pension scheme.
Pension advice provided to all employees up to £500 per year.
Loans with a beneficial interest rate, provided the loan is ≤ £10,000 throughout the tax year. E.g. Season Ticket
Exempt Benefits: Training/Equipment/WFH
Work related training courses.
Payments towards costs of working from home (need supporting documents if > £6 per week).
Exempt Benefits: Leisure
Trivial benefits provided by employers to employees. A benefit is trivial if it:
cost ≤ £50, and
is not cash, or a cash voucher, and
is not provided in recognition of services provided by the employee.
Up to £150 p.a. per head for social events. = if above NOTHING
Non-cash gifts from third parties (up to £250 p.a. per donor).
Entertainment provided by a third party.
Sports facilities available to employees but not general public (GYMS)
Exempt Benefits: Misc
Relocation and removal expenses up to £8,000.
Workplace nurseries/childcare.
Mobile phone (one per employee, EVEN PRIVATE USE)
Non-cash long service awards for ≥ 20 years’ service, maximum £50 per year of service.
Awards made under a staff suggestion scheme.
Use of free/subsidised on-site canteen available to all employees.
Living Accommodation: Not job-related
Higher of:
Annual value
Rent Paid by Employer
Add: Expensive Living Accommodation (if value above $75k)
(Cost to Employer-$75k)*2.25%
Add: Provision of services:
Assets*20%
Household bills
Less: Employee contribution
Taxable Benefit
Cost to Employer of Living Accommodation
(For expensive charge)
Purchase cost + any capital expenditure prior to start of current tax year
(Do not include redecoration)
If moves in more than 6 years after acquired date, use current market value given for move in date
Living Accommodation: Is job-related
Basic charger and expensive accommodation value become nil
Provision of services is limited to 10% of net earnings (salary+employment benefits)
Taxable on Employment Income
Home entertainment systems: 20% pro-rata
Health club membership = 100%
Private medical = only the excess
