Employment Income Flashcards
State the factors of employment or self-employment
Indicators of employment:
- Obligation to work
- Employer controls manner and method
- Sick pay/ holiday pay
- Specified number of hours
- Equipment provided
- obliged to work exclusively and personally for employer
What is the proforma for calculating employment income?
Salary/ Bonus
Benefits
Private Expenses reimbursed
Cash Vouchers
Less: Allowable expenditure OPS Professional subscriptions Mileage allowance (42p/25p) Business Expenditure Shares in a SIP (max 10% salary)
Add:
Redundancy payments
Less: Exemption (30k)
Add: Non tax advantaged share option scheme
Employment income
What basis do we calculate employment income under?
On a receipt basis.
The earlier of:
- Actual payments
- Becoming entitled to such payment
State the allowable deductions for employment income
General Rule: Wholly Exclusively and necessarily in the performance of duties
- Employee contributions to Occupational Pension Schemes
- Fees/ Subscriptions to professional bodies
- Payments to Charity (payroll deduction scheme)
- Expenditure on work travel
- Capital Allowances
State the Exempt Benefits
- Employer contributions to a registered pension scheme
- Pension advice up to £500
- Subsidised canteen available to all employees
- Car parking space
- One mobile phone
- Work related training
- Sporting facilities available to employees and not to general public
- Welfare counciling
- Staff parties ( up to £150 pp)
- Workplace nursuries
- Relocation expenses paid/reimbursed up to £8k.
- Job related accommodation
- Overnight expenses £5 a night in UK £10 overseas
- Loans > £10,000
- Employer contributions towards household costs where employee works at home
- Home worker expenses up to £6 a week
- Medical treatment up to £500 a year to enable an employee to return to work.
- Trivial Benefits which cost > £50 (not cash)
- Long service awards in kind (if employed for 20+ years (£50.)
How would we calculate living accommodation benefit?
- Basic Charge:
Lower of:
a) Annual Value
b) Rent paid by employer
- Additional expensive charge (if property is owner by employer and costs > £75k)
(Cost - £75,000) x ORI (2%)
If owned for more than 6 year - MV when first provided to employee including subsequent capital improvements.
How do you calculate the motor car benefit?
Benefit = Appropriate % x list price
List Price plus costs of extras/accessories l
Less capital contributions by employee (max £5k)
How do you calculate the fuel benefit?
Appropriate % x £24,600
Ignore partial contributions by employees.
How do you calculate the van benefit?
Private use: £3,500
Private Fuel: £669
If unavailable for > 30 days - time apportion.
How do you calculate the loan benefit?
if exceeds £10,000
Average method = opening + closing /2
Strict method - Balance x ORI on a daily basis
Benefit:
Interest that should be paid x
Interest that has been paid (x)
Benefit
State the tax implications of share options if approved
Grant: No tax implications
Exercise: No tax implications
Disposal: Capital gains arises
Sale proceeds x
Admin cost. (X)
Cost of shares (x)
Gain
Business asset disposal relief will be available if:
company is trading
Employee owns >5% of OSC and
Has owned shares for at least 2 years
State the tax implications of share options if unapproved
Grant: No tax implications
Exercise: Employment income - IT on benefit
State the tax implications of share options if unapproved
Grant: No tax implications
Exercise: Employment income - IT on benefit MV at exercise date x admin. (x) cost of shares (x) Employment income x
Class 1a NIC charge if shares readily convertible to cash (unless quoted) If quoted class 1 would be calculated
What are the tax advantaged share option schemes?
Save as you Earn (SAYE)
Company share option plan (CSOP)
Enterprise management incentives (EMI)
How does as SAYE scheme operate?
Employees save and then use the funds to pay for share or take the cash
