Employment Income

Question 1

What three types of income constitute employment income?

Answer 1

1. Salaries & Bonuses
2. Benefits
3. Pensions

Question 2

What is the standard Proforma for Employment income?

Answer 2

Salary
Bonus
Benefits

Less Allowable Deductions (incl. pens.)

Employment Income

Question 3

At what point do we recognise when bonus income is received?

Answer 3

The earlier of date of entitlement and date of receipt.

Question 4

Name 7 types of allowable deductions for employment income?

Answer 4

1. Registered occupational pension scheme contributions.
2. Professional body subscriptions (i.e. ACCA)
3. Approved mileage deductions
4. Payment to charity under payroll deduction scheme
5. Qualifying travel expenses
6. Capital allowances on P&M for necessary performance of duties.
7. Any expenses incurred wholly, exclusively and necessarily in the performance of duties.

Question 5

What are the two main rules when calculating company benefits?

Answer 5

1. Pro rate for part availability

2. Deduct any employee contributions to the benefit

Question 6

If accommodation is provided that is job related what is the taxable benefit?

Answer 6

Nil

Question 7

If accommodation is provided that is not job related, what is the taxable benefit?

Answer 7

Greater of

• Annual Value
• Rent Paid by Employer

additional charge if cost > £75,000

official rate of interest * (cost - 75,000)

Question 8

If living expenses are job related, what is the taxable benefit?

Answer 8

Cost of providing but limited to 10% of net earnings.

Question 9

If living expenses are not job related, what is the taxable benefit?

Answer 9

Cost of providing only

Question 10

If use of employers assets are available, what is the taxable benefit?

Answer 10

Higher of:

• 20% of original value
• Rental cost

Question 11

If assets are given to the employee brand new, what is the taxable benefit?

Answer 11

Cost

Question 12

If assets are given to the employee but are used, what is the taxable benefit?

Answer 12

Greater of:

• MV when given
• MV on acquisition date less benefit assessed in respect of use.

Question 13

How is the taxable benefit of beneficial loans calculated?

Answer 13

Interest at the official rate

Question 14

Upto how much can a beneficial loan be for it to be exempt?

Answer 14

Upto £10,000

Question 15

If medical insurance is provided by an employer, what is the taxable benefit?

Answer 15

Cost of providing.

Question 16

If fuel for private motoring is provided, how is the taxable benefit calculated?

Answer 16

£22,600 * % used to calculate car benefit

Question 17

If a company van is provided by an employer, what is the taxable benefit?

Answer 17

£3,230

+ £610 charge for any private fuel.

Question 18

To which scenario are Personal Service Companies applicable? i) Sole Trader ii) Where a Company is formed

Answer 18

Where a company is formed

Question 19

To when does the Personal Service Company (IR 35) anti-avoidance legislation apply?

Answer 19

When an individual sets up a company to offer their services rather than be employed.

Question 20

What is a ‘deemed salary’?

Answer 20

Deemed salary is calculated where an individual would have been employed but for their intermediaries.

Question 21

True or False: Deemed salary is from relevant engagements - not actual salary.

Answer 21

True