Chapter 8 - Income from employment (2)

Question 1

Main conditions of trivial benefits in kind: 3

Answer 1

1. Does not exceed £50
2. Benefit is not a cash or cash voucher
3. Benefit is not provided in recognition of particular services performed by the employee in the course of the employment

Question 2

If trivial benefits are provided to directors of a close company the conditions which apply are: 4

Answer 2

1. Exception is capped at £300 per director per year
2. If benefit exceeds £50 the full amount is taxable
3. Non-cash vouchers are eligible is all criteria is satisfied.
4. If the benefit is available for another exemption, it is employed in a way most favourable to the employee.

Question 3

What is the fair bargain rule?

Answer 3

No taxable benefit arises if an employee acquires goods or services from their employer at the same price and terms as would apply to the general public

Question 4

Living accommodation benefits rule: 2

Answer 4

1. Accommodation owned by employers - the employee is taxed on the annual value of the accommodation. In practice, this is taken as the accommodations rateable value.
2. If the accommodation is rented by the employer, the employee is taxed on the greater of the rent paid by the employer and the accommodations annual value.

Question 5

What is the expensive accommodation rule?

Answer 5

Accommodation costing the employer more than £75,000 is regarded as expensive and gives rise to an increase in the taxable benefit. This is calculated by applying the appropriate percentage to the amount by which the cost of the accommodation exceeds 75k.
- the cost of providing accommodation is generally equal to the purchase price of the property plus the cost of improvements made to the property before the start of the tax year concerned less any capital contributions made by the employee.

Question 6

Job related accommodation rules: 3

Answer 6

1. if it is necessary for proper performance of duties
2. provided for better performance of duties
3. threat to security

Question 7

Assets loan to employees for private use rule: 2

Answer 7

If employer lends asset for private use the employee is taxed each year at 20% of asset value on the date of loan. If sold, taxed on the greater of:

1. the market value of asset less any amount paid by employee for asset
2. market value of the asset when first loaned to employee less the amounts already assessed to tax during period of loan - less any amount paid for asset

Question 8

What do ancillary services include?

Answer 8

Heating and lighting
Repairs
Maintenance
Cleaning
Furniture (taxed as loaned asset)

If job related ancillary services cannot exceed 10% of earnings.

Question 9

What is the price of a car for the purpose of calculating benefits in kind? 4

Answer 9

1. The sum of:
   i) the list price of the car when new, inc accessories
   ii) the cost of all optional accessories fitted to car before made available to employee
   iii) “” costing £100 or more and fitter to the car after it was made available to employee

Question 10

Other cars for provide use rules for tax? 3

Answer 10

1. The maximum taxable benefit is based upon the price f the car less any cap contributions (max £5,000) made by the employee towards the car’s cost.
2. If “classic” -15 years old with market value of at least £15,000

Question 11

What is a pool car? 3

Answer 11

1. Used by more than one employee
2. not kept at employees residence over night
3. any private use by employee is incidental to its use for business purposes.

Question 12

Vans for private use rules: 3

Answer 12

No taxable benefit unless employee is able to use van unrestricted for personal use. Liable on £3230 if this is the case.

1. Reduced proportionately if only available for part year
2. If employer pays for fuel taxable benefit is £610
3. No taxable benefit for heavy goods vehicle unless solely used for personal

Question 13

Beneficial loan rules: 4

Answer 13

Low rate of interest is when lower than official rate

1. Loans made in ordinary course of employers money lending business on same terms to customers are ignored
2. Loans which qualify for tax relief are ignored
3. Made to relative of employee is ignored if employee does not benefit
4. Does not exceed £10,000 or not covered by the above

If loan is written off during the year the entire amount written off is taxable. No taxable benefit arising if a loan is written off on the death of the employee.