Chapter 6 - Income from Savings and Investments

Question 1

Test of taxpayers employment status? 2

Answer 1

1. If it can be shown that a contract of service exists, then the taxpayer is regarded as an employee who is in service to an employer.
2. If it can be shown that a contact for services exists, then the taxpayer is regarded as self-employed who is rendering services to a client.

Question 2

Criteria to distinguish between the two types of contracts? 6

Answer 2

1. Control - To what extent the person who is paying for the work has over the payee.
2. Remuneration and financial risk - employees usually receive a regular wage or salary. paid regardless of profits being made.
3. Equipment - employees do not provide their own equipment.
4. Work performance and correction. Employees are expected to do their work themselves, if mistakes are made they will correct during working hours and get paid for both work and correction.
5. Holidays and sickness.
6. Exclusivity - employed by one employer or have many clients?

Question 3

Non-taxable employment income:

Answer 3

1. Trivial benefits in kind costing £50 or less
2. Free or subsidised meals in a staff canteen
3. Party or function for staff not exceeding £150 per head
   - if over this amount it is all taxable
4. Provisions for parking
5. Provision for taxi home later than 9pm work (60 max)
   6.

Question 4

Deductible expenses incurred by an employee: 5

Answer 4

1. Contribution to an occupational pension scheme if deducted from the employees pay by the employer
2. Subscriptions made to relevant professional bodies.
3. Donations made under a payroll giving scheme.
4. travel and subsistence expenses necessarily incurred in the performance of the duties of the employment.
5. Other expenses incurred wholly exclusively and necessarily in the performance of duties of the employment.

Question 5

Payroll giving schemes

Answer 5

Employees whose employers operate an approved payroll giving scheme may make charitable donations by requesting that the donations should be deducted from their gross earnings

Question 6

Ex-gratia payment limits:

Answer 6

30,000

Question 7

High income child benefit charge:

Answer 7

Child benefit is a social security benefit which is not taxable. A taxpayer with adjusted income over £50,000 loses 1% of this allowance each £100 up to £60,000