employment income

Question 1

who is an employed person

Answer 1

have a contract of services
earnings recorded in income tax

Question 2

who is a self employed person

Answer 2

have a contract for services
earning are recorded in trading income

Question 3

what are the Conditions to consideration while determining employment or self employment:

Answer 3

• Obligation: Either obligation to follow everything directed by Employer
• Control: Controllability by Employer
• Fixed Hours: Number of Fixed working hours
• Integration: Work performed, integral part of Business
• Risk: Financial risk arising from not being paid an agreed, regular, remuneration & Risk and
  rewards provided on equipment provided by employer
• Equipment: Use of Equipment can be a useful factor
• Rights: Right to receive sick pay, benefits etc
• Source of work: How many sources of Income does the individual have

Question 4

how should we distinguish what is an allowed expense? and what’s the pneumonic?

Answer 4

• if it is necessary, exclusively, and wholly for a business
  -NEW

Question 5

when is bonus / salary recorded on the tax statement

Answer 5

earliest of :
-entitlement date or
-receipt date

however

If after Entitlement date, salary is not received within 9 months then Entitlement date is effectively ignored

Question 6

what traveling expenses are considered allowable

Answer 6

• Office to Client or Vice versa
• Office to Temporary workplace (site based) or Vice versa
• Home to Temporary workplace (Seconded) or Vice versa

Question 7

what is a temporary work place

Answer 7

Business Purpose Travelling

Temporary workplace is a place where employee does not work more than 24 months

Question 8

what traveling expenses are treated as disallowable

Answer 8

Private Purpose Travelling (Non-Deductible):
* Home to office or vice versa
* Home to holiday or vice versa
* Office to holiday or vice versa

Question 9

what are other business related deductible expenses

Answer 9

• Professional subscriptions
• Employee occupation pension scheme contribution
• Payroll deduction/ gift as you earn (Gaye)
• Other deductible expense

Question 10

what is approved mileage allowance

Answer 10

• If an Employee uses his own car for employer’s work than employer compensates for the mileage travelled

Question 11

what is the statutory limit

Answer 11

o 1st 10,000 Miles 45p/mile
o In excess of 10,000 miles 25p/mile

Question 12

when are benefits taxable

Answer 12

Benefit is Taxable if:
* It arises “by reason of employment”
* Provided to Employee or his member of family
* Paid by employer or third party

Question 13

how to calculate expensive accommodation benefit

Answer 13

(Cost – 75,000) X Official Rate of Interest (2.25%)

Question 14

what are the types of benefits

Answer 14

• Exempt Benefits (Provided against facilities for business purpose)
• Taxable Benefits (Provided against facilities for private purpose)

Question 15

when is job related accommodation exempt

Answer 15

• For Improvement of your performance
• For Improvement of Company’s Performance
• Threat

Question 16

how do you calculate car benefit

Answer 16

(list price-capital cont/component by ee(5k)) x tax rate(CO2)- running expense cont by ee

look at tax table

Question 17

how much is the maximum amount of capital contribution

Answer 17

5000

Question 18

how to calc fuel benefit

Answer 18

27800 *CO2 rate

Question 19

how to calculate non job related accommodation benefit

Answer 19

PICK THE HIGHER OF:
annual property value
or
rent paid ebb employe\

+

EXPENSIVE HOUSE(IF THE COST OF PURCHASE IS MORE THAN 75K):

(cost/mv+ capital improvement up to prior year -75k) x 2.25%(ORI)

-employee contribution

Question 20

when is market value used instead of cost

Answer 20

when the date of purchase to the date of provision of the house is more than 6 years

Question 21

what do you do to the formula is the time is not a year exact

Answer 21

you must time apportion

Question 22

how to calculate the job related utilities benefit

Answer 22

you pick the LOWER OF : cost paid by employer

or the

10% of employee net earnings ( excluding accommodation benefit )

Question 23

how to calculate non-job related utilities benefit

Answer 23

it is the cost paid by the employer

Question 24

how to calculate use of asset benefit

Answer 24

MV of the asset when first given for employment (how much was it worth when the employer provided it to the first person not its current value) x 20%

Question 25

how to calculate gift of asset benefit (for NEW ASSET)?

Answer 25

it is simply the cost to the employer

Question 26

how to calculate gift of asset benefit (old asset already in use )?

Answer 26

pick the higher of:

mv of asset on date of gift

or

mv of the asset when first provided LESS cumulative TB for use of asset

Question 27

when does loan benefit apply

Answer 27

it is a benefit which may be only taxed if the value exceeds 10k

Question 28

how to calculate loan benefit

Answer 28

pick the lower off
1. the actual method
and
2. and the average method

Question 29

how to calculate loan benefit
actual method

Answer 29

1. use the interest formula :

(principle amount x ORI(2.25%) x time apportion)

2. take away any employee contribution:

LESS: (principle amount x employee contribution x time apportion)

Question 30

how to calculate loan benefit average method

Answer 30

1. find out the average principle :

(OP bal - CLOSE bal)/2

2. use the new principal in the interest formula

principle amount x ORI x time apportion

3. take away any employee contribution:

less: (principle amount x employee contribution x time apportion)

Question 31

how to calculate medical insurance benefit

Answer 31

Cost to employer – Employee contribution

Question 32

how to calc eduction benefit ?

Answer 32

marginal cost is the only taxable benefit for any educational related benefit

Question 33

what is the minimum benefit for van

Question 34

what is the minimum benefit for vans fuel

Question 35

why is the first mobile exempt from tax

Answer 35

because we assume its work related but the following phones must be taxed