Employment Income Flashcards
What makes up employment income?
Salary Bonus/commission Taxable benefits Reimbursed expenses Cash vouchers
What are allowable deductions against employment income?
Expenses wholly/exclusively/necessarily Occupational pension scheme contr. Subscriptions to professional bodies Charitable donation:payroll ded. Scheme Travel and subsistence Use of own car - mileage allowance
Basis of assessment for employment income?
Receipts basis
Most earnings are deemed to be received:
Earlier of:
Payment date
Date of entitlement
Basis of assessment for directors?
Earliest of:
Payment date
Entitlement date
Credited in company accounts
Determined date
Before end of period - period end date
After end of period - determined dat
What makes a deduction allowable?
Obliged to pay the expense
Wholly/exclusively/necessarily
When are reimbursed expenses taxable?
When the expense is not an allowable deduction
Travel from home to work exceptions?
No normal place of work
Home is workplace and travel for work
Temporary workplace < 24 months
Entertaining reimbursed directly treatment?
Exempt for employee
Disallowed for employer
Specific entertaining allowance treatment?
Include in Income for employee
Deduct entertaining expenses incurred
Fully disallowed for employer
General expense allowance treatment?
Include in income for employee
Deduct allowable expenses except entertaining
Allowable for employer
Statutory mileage rate scheme: Applies to? What miles are included? Car rates? Van rates? Passenger rate? Motorcycle rate? Cycle rate?
Applies to employees and volunteers Only business miles Car/van - 45p first 10k miles - 25p > 10k Passenger - 5p per passenger per mile Motorcycle - 24p per mile Cycle - 20p per mile
What happens when the payments received from employers differ from the statutory mileage rate scheme allowance?
Payments exceed allowance - taxable benefit
Payments less than allowance - allowable deduction
Name as many except benefits in kind as possible:
Hint - Kaplan name 17 in total!
Living accomodation - job related Work buses Parking space near or at work Vehicle battery charging near/at work Loans < 10k per annum Exp. Away on busin. £5UK a night or £10 1 mobile Insignificant computer eq. private use Medical treatment - return to work £500 Childcare run by employer Pension advice up to £500 Counselling/retraining on redundancy Free canteen/subsidised meals all staff Max 8k removal expenses on relocation Annual socials up to £150 per person Recreation facilities employees no public Working from home expenses
What 3 things makes a benefit a trivial exempt benefit?
Less than £50
Not cash or voucher
Not in recognition of services
(Certain directors have overall cap of £300)
4 exempt overseas benefits?
Board and lodging
Travel home
For overseas > 60 days
Travel spouse/minors 2 return visits PY
Medical treatment and insurance
Taxable benefits 3 general rules?
Taxable amount is cost to employer
(Marginal cost if provided in house)
Time apportion for availability
Employee payments deducted
Living accommodation benefit:
Employer owns property?
Employer rents property?
Employer owns property Rateable value (given) and: Extra charge: Cost + improv. - 75k x official int rate 2%
Employer rents property
Higher of:
Rateable value (given)
Rent paid by employer
Living accommodation benefit:
What effect does the Employer ownership have on the benefit?
For the extra charge the cost in the formula depends on the ownership period:
>6 years - use market value when employee moved in plus improvements since that date
<6 years cost+improvements
Are living expenses in living accommodation taxable?
Yes: Heating Lighting Cleaning Repairs Decoration Furniture - (rules for assets lent for private use)
How do you calculate the benefit for assets lent for private use:
Employer owns asset?
Employer rents asset?
Employer owns asset Annual value (20%) x MV when provided
Employer rents asset
Higher of:
20% x MV
Rebt paid by employer
Job related accommodation includes in general:?
Accommodation necessary for performance of duties
Customary to be provided/better for performance of duties
Security reasons
What is the job related accommodation living expenses restriction
Benefit on living expenses but restricted to 10% of net earnings
Car benefit formula?
List price x CO emission formula
What is included in the list price for car benefits?
What is deducted? Is deduction restricted?
List price (obvs) Optional extras
Deduct any contribution from employee
Restricted to 5k
CO2 emissions %: Zero? 1-50gkm? Increase by what % cars older 06/04/20? Diesel surcharge? Max percentage?
Zero 1%
1-50gkm 1-13%
Increase by what % cars older 06/04/20
1%
Diesel surcharge - 4% unless meet RDE2
Max percentage - 37% (see HTT)
Car benefit apportionment?
Time apportioned for availability
Fuel benefit?
CO2 emissions% x £24,600 No partial fuel contribution deduction No benefit if pays all fuel Time apportioned for availability Fuel not available then available in tax year no time apportionment allowed
Van benefit?
Van fuel benefit?
Van benefit - £3,500
Van fuel benefit - £669
Employment loan benefit?
Benefit below 2% charge for loan > 10k
Or not on commercial terms
Average method
B/F bal - C/F bal average or
Balance taken out or redeemed supersedes
Strict method
Monthly benefit
After both methods deduct actually paid average method usually applies
Loan write off treatment?
Treated as income tax subject to income tax and class 1 NICs
Asset transferred to employee benefit calc?
Higher of:
MV when gifted
MV when provided
Less
Benefits paid for lending of same asset previously (see lent asset benefit rules)
Optional remuneration arrangements
Taxable value?
Subject to NI?
Higher of:
Cash given up
Taxable value under normal rules
Yes subject to class 1 NI through P11D
Option remuneration package rules must be applied even if exempt package with the following exemptions:
Pension savings Employer provided Pension advice Childcare Cycle to work - Cycle and equipment Ultra low emission cars
