Employment Income Flashcards
What does employment income include?
Income arising from employment, income of an office holder (e.g. Director) and any incidental benefits obtained by an employer (e.g. bonus).
When will employment income be taxed?
Receipt basis - the actual amounts received in the tax year.
What are the 2 general rules when it comes to taxable benefits?
1 - Time apportion (monthly basis for exam) if not available for full year.
2 - Deduct contributions made by the employee from the taxable benefit.
What makes accommodation ‘job related’
- Necessary for the proper performance of the employee’s duties.
- Better performance of the employee’s duties and is of a kind in which it’s customary for it to be provided.
- Security reasons.
What is the basic rental benefit?
The higher of:
1. The annual value
2. Any rent paid by the employer
When is a property classed as expensive?
If the original cost to the employer was more than £75k
What is the market value rule?
(Cost-£75k) x official rate of interest at the start of the tax year (2%)
Cost = Original Cost +improvements made before the start of the tax year
What is a taxable benefit?
(The cost to the employer - any employee contribution)
What is the taxable benefit provision when it comes to cars and fuel?
Only available to private use by the employee (includes commuting)
What is the basis of the charge on Cars?
CO2% x List Price = Taxable Benefit
% - For CO2 > 75g/km: CO2 - 75/5 = X (round down) + 20% (+4% for Diesels that don’t meet local standards) (-1% after 2020) Max = 37%
List price - deduct capital contributions of up to £5k
What is the basis of the charge on Fuel?
Fuel benefit - an additional benefit will apply where the employer pays for fuel used during private journeys.
%(same as car benefit) x £27,800 = Taxable benefit
How are Vans used privately taxed?
No benefit if only used for commuting.
Benefit is an annual amount of £3,960 (look in tables)
Separate charge for fuel used for private use, annual benefit is £757.
How are assets available for private use taxed?
Higher of:
20% x MV when first provided
Rent paid by employer
If there is significant private use, calculate the benefit in full then apportion for non-business use.
What is the general rule towards other benefits?
Cost to employer = benefit
What benefits are exempt?
Contributions by an employer to a registered pension scheme
Pension advice up to £500 per tax year
Workplace nurseries
One mobile phone
Computer (private use irrelevant)
Free/subsidised meals in a canteen
Annual social events up to £150
Third party entertainment
Non-cash gifts from third parties up to £250 per tax year
Provision of parking space
Staff awards up to £5k
Medical treatment for return to work up to £500
Non private health screening/eye test
Relocation £8k
What is the PAYE system?
How employers calculate and deduct tax from employees
How are PAYE codes formed?
Positive - Remove last digit and add a letter:
L = basic PA
N = £11,310 (less £1260 from marriage allowance)
M = £13,830 (plus £1260 from marriage allowance)
or
Negative - Remove last digit, -1, put K at the beginning
What are examples of taxable benefits?
vouchers
living accomodation
cars/fuel for private use
private usage of vans
what are employees taxable on the provision of?
Cash vouchers
Credit tokens
Vouchers
What is a cash voucher?
taxable amount is the sum of money for which the voucher is capable of being exchanged
What is a credit token?
taxable amount is the cost to the employer of providing the benefit - employee contributions
What makes any accommodation job related?
Necessary for proper performance of duties
Enhancement of performance
Employee security
