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PTX > Employment Income > Flashcards

Employment Income Flashcards

1
Q

Employment income definition

A

Money (or money’s worth)
Arising from employment

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2
Q

Employment income =

A

Salary
+ bonus
+ taxable benefits

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3
Q

Basis of employment income taxation

A

Receipts basis

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4
Q

EI: Salary on receipts basis

A

Tax the gross on every payday
(In tax year)

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5
Q

EI: Bonus on receipts basis: Deemed to be received on:

A

The earlier of:
1. Payment date
2. Date they become entitled to payment

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6
Q

EI: Taxable benefits on receipts basis

A

Benefits calculations

If benefit only provided for part of year then apportion to nearest month

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7
Q

EI: Taxation on employer benefit there is no specific rule for

A

Marginal cost to employer
Minus any contributions made by employee

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8
Q

ET: Tax treatment of vouchers

A

Three treatments:

  1. Non-cash voucher
  2. Cash voucher
  3. Credit token
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9
Q

Non-cash voucher

A

Voucher or card
Exchangeable for goods or services
E.g. book token

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10
Q

Cash voucher

A

Voucher or card
Exchangeable for cash

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11
Q

Credit token

A

Usually credit card
Can be used to obtain:
Money
Goods
Services

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12
Q

ET treatment of: Non-cash voucher

A

Cost to employer
Less any amount paid by employee

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13
Q

ET treatment of: Cash voucher

A

Amount for which voucher can be exchanged

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14
Q

ET treatment of: Credit token

A

Cost to employer
Less any cost paid by employee

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15
Q

Which vouchers are exempt from ET?

A

Vouchers for approved childcare

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16
Q

ET treatment of: Trivial benefits

A

Exempt

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17
Q

(ET) Trivial benefits exception

A

Cap of £300
When provided to certain directors

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18
Q

Trivial benefit conditions:

A

All of:

  1. Cost less than £50
  2. Not cash or cash voucher
  3. Not provided in recognition of services
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19
Q

What happens if a benefit fails trivial benefit conditions?

A

Taxed normal way

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20
Q

ET benefits exempt from income tax
(Needed for exam)

A
  1. Free/subsidised on-site canteen
    (Must be available to all employees)
  2. Sport facilities
    Available to employees
    But not general public
  3. Workplace nurseries/childcare
  4. Vouchers approved for childcare
  5. Health screening and medical check up
    Once per year
  6. Glasses and eye tests
    For employees who use VDUs
  7. Recommended medical treatment to help employee return to work
    Up to £500
  8. Use of bicycles
    And cycling safety equipment
    If available to all employees
  9. Work busses
    Subsidies to use work busses
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21
Q

Tax exemption of approved childcare vouchers conditions: Two conditions

A
  1. In scheme before 6 Apr 2011
  2. In scheme from 6 Apr 2011
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22
Q

Tax exemption of approved childcare vouchers conditions: Joined before

A

£55 p/w

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23
Q

Tax exemption of approved childcare vouchers conditions: Joined after

A

£55 p/w basic rate

£28 p/w higher rate

£25 p/w additional rate
From 6 Apr 2013

(Until 4 Oct 2018)

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24
Q

How is tax rate worked out for calculating childcare vouchers?

A

Basic earnings assessment

Only considers certain employment income elements
No other sources

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25
Q

Provision for job-related accommodation conditions

A

Must be job related:

Necessary for performance of duties
Customary to be provided
Provided for security

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26
Q

Job-related accommodation example: Necessary for performance of duties

A

Caretaker

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27
Q

Job-related accommodation example: Customary to be provided

A

Police officers

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28
Q

Job-related accommodation example: Provided for security

A

Barracks

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29
Q

Conditions for job-related accommodation provision: Directors

A
  1. Own no more than 5% shares
  2. Full time working director
    (Unless charity/non-profit making)
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30
Q

Non job-related living accommodation rented by employer provision conditions: Depends on

A

Owning or renting

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31
Q

Non job-related living accommodation rented by employer: What is the rule?

A

Benefit time apportioned for part availability
Any rent paid deducted from value of benefit

Higher of:

  1. Annual/rateable value
  2. Rent paid by employer
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32
Q

Non job-related living accommodation rented by employer provision conditions: Owning

A

Benefit time apportioned for part availability
Any rent paid deducted from value of benefit

  1. Basic benefit = Rateable value
  2. Additional benefit if:
    House cost over 75k
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33
Q

Non job-related living accommodation rented by employer provision conditions: Owning: Additional benefit calculation

A

(Cost - 75k)
X
Official interest rate at start of tax year

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34
Q

Non job-related living accommodation: Owning: Cost definition

A

Original value when employer purchased the property

Plus capital improvements from cost date to start of tax year

But exceptions

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35
Q

Non job-related living accommodation rented by employer provision conditions: Owning: Cost: Exeption

A

If employer owned property for more than 6y before employee moved in

Then cost =
Market value
At date employee moved in

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36
Q

Living expenses for accommodation provision: Examples

A

Heating
Lighting
Cleaning
Repairs
Decoration

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37
Q

Living expenses for accommodation provision: Benefit

A

Cost to employer
Minus employee contribution

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38
Q

Employment tax provision: Cars provided for private use: Single car benefit: Covers what?

A

Running costs
Including:
Insurance
Maintenance
Road tax

Not fuel

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39
Q

Employment tax provision: Cars provided for private use: Single car benefit: Calculation

A

Manufacturer’s list price
X
CO2 emissions percentage

(Minus
Employee contribution)

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40
Q

Employment tax provision: Cars provided for private use: Genuine pool cars

A

None

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41
Q

Employment tax provision: Cars provided for private use: Single car benefit: Manufacturer’s list price calculation

A

Price
Plus optional extras
Minus employee capital contribution
Up to 5k

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42
Q

Employment tax provision: Cars provided for private use: Single car benefit: CO2 emission calculation: Zero emission cars

A

1%

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43
Q

Employment tax provision: Cars provided for private use: Single car benefit: CO2 emissions calculation

A

% from tax table

Round down to nearest 5g/km

Add 1%
For each complete 5g/km
Up to 75g/km

To a maximum of 37%
(Petrol and diesel)

44
Q

Battery range aka

A

Electric range

45
Q

Employment tax provision: Private fuel benefit

A

24,600
X
CO2 emissions %

Time apportioned if fuel not available all year

(Yes is a flat amount)

46
Q

Employment tax provision: Private fuel benefit: Employee contribution deduction

A

None

Unless
If employee pays all fuel
Then no benefit

47
Q

Employment tax provision: Van scale charge

A

£3,500
On private use of employer’s van

Time apportioned for part availability

Less employee contribution

48
Q

Employment tax provision: Van scale charge: Zero CO2 benefit

49
Q

Employment tax provision: Van scale charge: Used for travel between home and work + other private use is insignificant

A

No benefit

50
Q

Taxable benefit for fuel provided for private use in company vans (TT)

A

£669 (TT)

Time apportioned for part availability

51
Q

Taxable benefit for fuel provided for private use in company vans: Reduction for employee contributions to fuel costs

52
Q

Employment tax allowance: Assets lent for private use (other than car/van): Example

A

Furniture
In living accommodation
Provided by employer

53
Q

Employment tax allowance: Assets lent for private use (other than car/van): Depends on

A

Owning or renting the asset

54
Q

Employment tax allowance: Assets lent for private use (other than car/van): Owning: Calculation

A

Market value
When first provided for private use
X
20%

Annual value

Time apportion for part availability
Less employee contribution

55
Q

Employment tax allowance: Assets lent for private use (other than car/van): Renting

A

Higher of:

  1. Annual value
  2. Rent paid by employer

Time apportion for part availability
Less employee contribution

56
Q

Employment tax allowance: Assets lent for private use (other than car/van): Private use not significant

A

No benefit

57
Q

Employment tax allowance: Assets lent for private use (other than car/van): Private use not significant: Example

A

Work laptop for private email

58
Q

Employment tax allowance: Assets lent for private use (other than car/van): Exemptions

A

Mobile phones

Bicycles

59
Q

Real time information (RTI)

A

PAYE

Employer must submit details of pay and deductions every time they pay an employee with software.

60
Q

When must PAYE info be submitted

A

On
Or before
The day the employee is paid

61
Q

How is PAYE submitted

A

Using a FPS

62
Q

FPS

A

Full payment submission

63
Q

EPS

A

Employer Payment Summary

64
Q

When may an EPS be required?

A
  1. Statutory:
    Maternity
    Paternity
    Adoption
    Payments
  2. Employment allowance
65
Q

Employer processing benefits e.g. cars and medical insurance personally through the payroll

A

Voluntary payrolling

66
Q

Voluntary payrolling process

A

Employer reports value of benefits via RTI system

Treats cash equivalent of benefit like salary
So relevant tax is deducted under PAYE

67
Q

Only PTX benefit that cannot be processed through payroll

A

Employer provided living accommodation

68
Q

Can an employer choose which benefits to payroll?

A

Yes

E.g. payroll company vat benefits but not medical insurance

69
Q

Form completed by employer for each employee at the end of each tax year

70
Q

P60 details

A

Gross pay

Tax deducted

Employer and employee NIC

71
Q

P60 deadline

A

31 May after end of tax year

72
Q

Form providing HMRC with details of the benefits provided to each employee during the tax year

73
Q

P11D deadline

A

6 July

Following end of tax year

74
Q

People given P11D

A

HMRC

Employee

(Both same deadline)

75
Q

Is a P11D required for benefits that are payrolled?

A

No

But employer must submit P11D(b)

76
Q

P11D(b)

A

Shows cash equivalents payrolled these benefits

77
Q

P45

A

Four part form

Used when employee leaves

78
Q

P45 sections

A
  1. Summary of taxeable pay
  2. Tax
  3. NIC deducted
  4. Employers NI contributions

Up to date of leaving

79
Q

P45 information submitted to HMRC

80
Q

How is employee leaving communicated to HMRC

A

Leaving date included in FPS for period in which final payment is made

81
Q

Monthly income tax and NIC payments (by employer) dates: Due date (both PAYE and NIC)

A

14 days
After month ends

So 19th
(Because tax month 6th-5th)

82
Q

Monthly income tax and NIC payments (by employer) dates: Electronic deadline extension

83
Q

How must employers with more than 250 employees make monthly PAYE payments?

A

Electronically

84
Q

No. employees for electronic PAYE payment requirement

85
Q

How can employers with average monthly PAYEs and NIC no more than £1,500 total pay?

86
Q

Quarterly ET payment requirement that C must hit

A

£1,500 total
PAYE + NIC
Average monthly

87
Q

What can HMRC do where ET payment is seriously at risk?

A

Require SECURITY
E.g. cash deposit

Can be appealed:
Requirement to
Amount

88
Q

ET payment seriously at risk examples

A

Deliberately not paid
Large debts
Not responded

89
Q

Failure to provide ET security penalty

A

Fine

Up to 5k

(Criminal offence)

90
Q

Penalty regime for errors in FPS submissions under RTI

A

The common penalty regime for errors in returns

91
Q

Can late payment penalties be suspended?

A

Yes

If taxpayer agrees time to pay

And doesn’t abuse arrangement

92
Q

The 2 PAYE tax code forms

93
Q

Form P2 sent to:

94
Q

Form P2 gives detail of

A

How PAYE code has been calculated

95
Q

Form P9(T) sent to

96
Q

Form P9(T) contains

A

PAYE code only

97
Q

What spreads the employees allowance a cross the tax year?

A

Employer’s accounting software

98
Q

Calculating PAYE code process: Step 1

A
  1. Net allowances and deductions
99
Q

Calculating PAYE code process: Allowances

A
  1. PA
  2. Transfer of PA from partner
  3. Overpaid tax adjustment
100
Q

Calculating PAYE code process: Deductions

A
  1. Taxable benefits
  2. Transfer of PA to partner
  3. Underpaid tax adjustment
101
Q

Calculating PAYE code process: Step 2
Allowances > deductions

A
  1. Take net figure
  2. Remove last digit
  3. Add L
102
Q

L PAYE code

A

Entitled to basic personal allowance

(Letter codes provided)

103
Q

Calculating PAYE code process: Step 2
Deductions > allowances

A
  1. Take net
  2. Remove last digit
  3. Deduct 1
  4. Add K to start
104
Q

Calculating PAYE code process: What else can be included in underpaid tax deduction

A

Income tax from estimated savings & dividend income
In current year

Up to 3k

105
Q

Which tax rate to use when deducting the adjustment for underpaid tax?

A

Gross up
Using the individuals:
Estimated
Marginal
Rate of tax

106
Q

Marginal rate of tax definition

PTX (14 decks)

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