Employment Income Flashcards
Employment Income: Basis of assessment
Receipts basis
Employment income: Receipts basis
Earlier of:
- Actual payment date
- Date entitled to payment
Employment Income: Who has extra income-recognition rules?
Directors
Employment Income: Recognizing income: Directors: 3 extra rules
- Date earnings CR’ed
-
Last day of POA
If earnings determined before end of period - Date earnings determined
If determined after end of POA
Employment Income: Travel expenses: How long can an employee have a temporary workplace and have allowable travel expenses?
24m
Employment Income: Can entertaining expenses be deducted from a general/round sum allowance?
No
Employment Income: What happens if mileage payments from the employer: Exceed the statutory rate?
The excess is a taxable benefit
Employment Income: What happens if mileage payments from the employer: Are less than the statutory rate?
The shortfall is an allowable deduction
Employment Income: Living expenses benefit cap
(Furniture, bills etc.)
10% of net earnings
Employment Income: What happens if a loan is made to an employee below the official rate of interest?
Taxable benefit
Employment Income: Official rate of interest
2%
Employment Income: 2 methods of calculating below-interest-rate loans
- Average Method (default)
- Strict Method
Employment Income: Calculating below-interest-rate loans: Average Method
Average of loan outstanding at beginning and end of tax year, timesed by 2% interest
Employment Income: Calculating below-interest-rate loans: Average Method: What happens if the loan was taken out/redeemed during the tax year?
That balance is used instead of the balance outstanding at the beginning/end of the tax year
Employment Income: Calculating below-interest-rate loans: Strict Method
Calculate monthly benefit actually outstanding at the end of each month
Employment Income: Calculating below-interest-rate loans: When does the strict method apply?
If taxpayer elects to use it
(Otherwise the Average Method is used)
Employment Income: Calculating below-interest-rate loans: How is the actual assessable benefit calculated?
Loan amount (Strict/Average)
X
ORI
-
Interest actually paid
In the TY
Employment Income: Calculating below-interest-rate loans: What are the 2 times when there are no taxable benefits?
- The total loans (to the employee) in the TY
Is less than 10k - Loan made on normal commercial terms as a money-lending business
Employment Income: What happens when any amount of a loan to an employee is written off?
The amount written off is treated as a benefit so charged
(To IT and C1 NIC)
In full
At time of write-off
Employment Income: Benefit when employee has use of an asset and is then given the asset
The higher of:
- MV when gifted
- MV when first provided
Less
Benefit already taxed under private use rules
(Less amount paid by employee)
Employment Income: Private use rules
20%
Of MV
Per annum
For as long as the asset has been lent
Employment Income: Benefit when employee has use of an asset and is then given the asset: Exception
Car
Is always current MV
(Less employee payment)
Employment Income: Optional Remuneration Arrangements aka:
Salary sacrafice
Employment Income: Optional remuneration arrangements: Taxable value of benefit =
HIGHER of:
- Pay given up
- Taxable value under the normal benefit in kind rules
Employment Income: Optional remuneration arrangements: What is the taxable amount treated as?
A benefit
(Usually reported via P11D)
(And subject to class 1A NIC)
Employment Income: Optional remuneration arrangements: Are the benefits taxable even is usually exempt?
Yes
Employment Income: Optional remuneration arrangements: Exempt benefits
- Pension savings
- Employer provided pension advice
- Childcare
- Cycle to work (+ safety aquipment)
- ULE cars (Up to 75g/km of CO2)
Employment Income: Are trivial benefits (to ee’s) exempt?
Yes
Employment Income: Trivial benefits definition
ALL of:
- Not over £50
- a. Not cash
- b. Not cash voucher
- Not recognition of services
Employment Income: Trivial benefits: Thing to bear in mind
OBT cap (Of £300) to certain directors
Employment Income: Taxable benefit: General rule:
- Taxable amount = Cost to employer
- Time apportion
- Deduct ee payment
Employment Income: Taxable benefit: General rule: Benefit if provided in-house: Taxable amount =
Marginal cost
To the employer
Less contributions to the employee time apportioned for part availability
Employment Income: Taxable benefits: Living accommodation: Is there a benefit if job-related?
No
Employment Income: Taxable benefits: Accommodation: Employer owns the property
Rateable value (Given in exam)
PLUS
Expensive charge
Employment Income: Taxable benefits: Accommodation: Expensive charge
Cost
MINUS
75k
X
ORI
Employment Income: Taxable benefits: Accommodation: Expensive charge: Cost: Employer owned the property for more than 6y before the employee moved in
Market Value at date employee moved in
PLUS
Any capital improvements
SINCE employee moved in
BEFORE START OF TAX YEAR
Employment Income: Taxable benefits: Assets lent for private use: Employer owns the asset
(Including living expenses e.g. furniture)
Annual Value
Employment Income: Taxable benefits: Assets lent for private use: Annual Value calculation
MV when first provided
X
20%
Employment Income: Taxable benefits: Assets lent for private use: Employer rents the asset
HIGHER OF
1. Annual Value
2. Rent paid by employer
Employment Income: Taxable benefits: Assets lent for private use: What happens if they are shared by other employees?
Apportioned
(Just and reasonable)
Employment Income: Taxable benefits: Car benefit
Manufacturers list price
X
CO2 emissions %
Employment Income: Taxable benefits: Car benefit: Manufacturers list price: Do you include optional extras when originally bought?
Yes
Employment Income: Taxable benefits: Car benefit: List price: What to do with capital contributions by the employee?
Deduct them
UP TO A MAXIMUM OF
5k
Employment Income: Taxable benefits: Car benefit: List price: Is there a maximum list price?
No
Employment Income: Taxable benefits: Car benefit: Pool car benefit
None
Employment Income: Taxable benefits: Car benefit: Is it time apportioned?
Yes
BUT
Not for unavailable periods less than 30d
(E.g. repairs)
Employment Income: Taxable benefits: Fuel benefit: Deduction for partial contribution made by employee towards private fuel
NONE
Employment Income: Taxable benefits: Fuel benefit: Deduction for full contribution made by employee towards private fuel
Full
Employment Income: Taxable benefits: Fuel benefit: Time apportionment
The same was as car benefit
Employment Income: Taxable benefits: Fuel benefit: What to do if private fuel is not available for part of a tax year?
E.g. employee opts out of a scheme
Time apportioned
Employment Income: Taxable benefits: Fuel benefit: What to do if private fuel is not available for part of a tax year, and becomes available later in the same tax year?
E.g. employee opts out of a scheme
NO TIME APPORTIONMENT
