Employment Income Flashcards
Employment Income Pro.
Salary/Bonus/Commission/Tips..
Benefits in Kind
Less
Expenses “wholly, exclusively and necessarily incurred”
Occupational pensions schemes
Contributions to a payroll giving scheme
Professional subscriptions.
Allowable deductions
Take away allowable deductions from total taxable earnings to get met taxable earnings.
Allowable deductions cannot exceed total tax earning
Expenses occurred by employees are deductible when…
Employee is obliged to pay the expense
The expense is wholly, exclusively and necessarily in the performance of the duties of the emp.
Professional subscription fees
Proportion of expenses if required to work from home.
Necessary tools, uniforms, protective clothing.
Travel expenses deductions
Travel between work and home is not allowable
Can deduct travel and substinence between performance of their duties.
No normal place of work - then home to work is allowable. Eg client consultancy work.
If home is work locations.
Home to temporary workplace of no more than 24 months is allowed.
Entertaining expenses
If it is reimbursed directly then you include it as The salary and then minus from the salary
If it is specific entertaining allowance then include it as income and then deduct it from the income.
General allowance
Include as salary
Taxable Expenses
Professional subscription of 450 to CIOT
Allowable deduct full 450..
100 subscription to golf club for entertaining clients
No deduction not necessary for employ!!!
200 general round sum allowance of which 150 spent on entertaining
No deduction - full 200 will be spent on employee
250 for new suit - no deduction
100 specific spent on 80 Enter - 80 deduction
Statutory Mileage Rate Scheme
Employees volunteers using car bike van for business travel..
The excess from the statutory rate is taxable
Are less than the state rate
Then it’s an allowable deduction!!!
Statutory Mileage Rate
Car / Van 45p for first 10000 miles
25p after
Motorcycle 24p per mile
Cycle 20p per mile
Additional 5p per passenger
Mileage Allowance
Mileage Allowance
Car 47p 14000 business miles
47 * 14000 is 6580
Take away 4500
25 per mil 1000
It’s always the amount reimbursed
Less the statutory allowance.
Mileage allowance
If it’s positive it’s a taxable benefit it’s it’s negative it’s an allowable deduction.
Employee Loans
This is calculate the taxable benefit when there are loans made to their employees which are below the official rate of interest.
Employee loans - Average and strict method
Strict Method:
Amount of loan * number of months * 3%
Less
Interest Paid - amount of loan * no. of months * interest rate
Average method
The amount of the loan at the start of the year less the amount of the loan at the end of the year / 2 * 3%.
What’s the difference between the average and the strict method
The strict method is more exact. They both subtract the interest actually paid but the strict method has a more precise method.
Emoloyee loans - no taxable benefit when
The employee loan is less 10,000.
Loans made on normal commercial terms
The assets transferred to employees
If an employer purchases a new asset and gives it to an employee immediately the employee is taxed on the cost of the asset.
When the employee has use of the asset and is then given the asset the benefit is the-
Higher of market value when gifted Market value when first provided.
The assets transferred to employees
Market price when gifted
Market gift when first provided
Less benefit already taxed..
The assets transferred to employees- car/van/bike
The benefit is current market value less employee cont.
The assets transferred to employees - Q’s.
Market value when first provided
Less market value * 20% * pro rate if necessary.
Whe the employees has paid for anything subtrt.
Taxable Benefits- Revision
Living accommodation-
If the ER rents the property the benefit in kind is valued at the higher of
Rent paid by the Employer/ Annual Value(told in the question).
Taxable benefits-when the employee owns the propert.
The benefit in kind is the Annual Value of EXPENSIVE
Cost + capital expenses > 75,000
Charge-
Cost
Less 75,000
Excess
Excess * ORI
Market value if more than 6 years between move in date.
Car benefit
Benefit =manufacturer’s list price
* CO2 emissions
Car benefit - list price
Includes optional extras when originally bought
Deduct any capital contributions made 5k
CO2 emissions %
95 grams 14%
Additional complete 5%
Round down to nearest 5g/km
3% supplement for diesel cars
Max-37%..
CO2 Emissions
Lower rates for qualifying cars-.
Cars-
employees.
Deduct for Employees private use
No car benefit for pool cars
Benefit covers the running costs of the car including insurance, maintenance and road tax.
Time apportion benefit for part availability
Unavailable periods
Car Benefit- Fuel
Fuel benefit
Benefit = the CO2 emissions * 22100
Car benefits- fuel
No deduction for employee partial contribution towards fuel.
If employee pays for the cost of the private fuel there isn’t taxblebenefit.
Assets lent for PU.
Employer owns the asset-
Benefit - 20% * market value
Employer rents the asset
Benefit higher of 20% * MV
Rent paid by employer
Childcare payments
Exemption available if employer contracts directly with or provides vouchers for an approved child carer.
Amount of exemption depends on when the employee joined the scheme.
Employee joined pre April 2011
Up to 55 week exempt
Employee joined on or after 6 April 2011
55 week exempt basic rate
Higher rate 28 week exempt
Additional rate 25 week.
Living Expenses.
In addition employees taxed on living expenses
Heat and lighting
Cleaning
Repair
Decoration
Benefit is the cost to employer less the employee contribution
Furniture benefit is the use ofasset rules…
Living expenses
Add back on the living expenses and the 20% of furniture.
If the total is more than 10 per cent of total taxable earnings- the lower of 10 per cent of total taxable earnings or the total expenses!
Car expenses - Employee
No Private Use deductions for Employees unless the employee ACtuLLY pays for the private use.
Client entertaining
Have to add on the entire amount of the round sum allowances for the client entetaining- not allowed round sum allowances!
Travel to and from work-permanent workplaces
If it’s a permanent workplace it’s not deductible
Taxable expenses - Property Income
Property income less expenses-mortgage interest and agent fees
