Employment income and close companies Flashcards
What are the rules used to distinguish between employees and the self-employed are used?(8) CIRCLES + 1
Contract for service vs contract for services
Integral position e.g. Director
Risk borne by person
Control of hours, place, method vs direction by other
Legal rights to NIC, regular pay, benefits
Equipment/Exclusivity
Substitute - employed cannot use substitute worker for job
Works solely for one firm
What are The circumstances in which the personal service company (IR 35) rules apply?(4)
Company enters into contract with a client to provide service
Service provided by an individual
If service provided by individual under contract, individual would be regarded as an employee
Individual owns at least 5% of company or entitled to receive payments from company in respect of services
What items are considered when calculating deemed employment income?(6)
Income from relevant engagement Less: 5% compulsory deduction Salary, pension, employer NIC Less employer NIC deemed employment income (DEI x 13.8/113.8)
When is accommodation provided by an employer job related?
It is necessary for the employee to reside in the accommodation for the proper performance of his job
The better performance of the employee’s duties and it is customary for such accommodation to be provided
There is a special threat to the employee’s security and the accommodation is provided as part of the security arrangements.
What are the components of the accommodation benefit to employees?
Basic charge:
Greater of - rent paid by employer or annual value (x/12)
Additional charge:
(Cost + capital improvements/MV - 75,000) x 4% x X/12 less rent paid to employer
Use MV if the property was acquired by the employer more than six years before it was made available to the employee
Use MV of the property when first occupied by the employee
What are the tax implications for the lease of a motor car by both company and individual?
Lease by company:
Individual impact-> relevant % x new list price + allowable amount x relevant % @ relevant tax rate
Company impact-> annual lease cost x 100%-VAT rate + fuel + taxable benefit x 13.8% less tax @ relevant rate ( net off with taxable benefit)
Lease by individual:
Individual impact-> mileage limit (10,000) x ( paid- allowable) pence + total mileage - mileage limit x ( paid - allowable (2)) pence @ relevant tax rate + class 1 NIC -> total mileage x ( paid - allowable) x 2%
Company impact-> total mileage x ( paid) pence + total mileage x ( paid - allowable) x 13.8% LESS tax @ company rate ( net off with NIC)
State the conditions that must be satisfied for a deduction for the travel costs paid by a company to be given against the employee’s total employment income.
The employee must be absent from the UK for a continuous period of at least 60 days for the purposes of performing the duties of his employment.
The journey must be from the UK to the place where the employee is carrying out the duties of his employment
Note:
A deduction is only available for two outward and two return journeys by the same person(s) in the same tax year
What items of redundancy pay are subject to income tax?
Statutory payments <=30,000
Payments for compensation for loss of office within above limit
Excludes consideration received for agreeing not to work for competitor
What items must one consider when calculating NIC for an individual in a partnership?
Calculate profit for the entire year LESS salaries paid to partners
Share of profit bases on net figure from above
What areas does contributing to a personal pension plan affect in ones tax calculation?
Adjusted net income would reduce by gross pension contribution
Personal allowance may be available after adjusted net income factors in contribution
Pension fund would receive a further contribution from HRMC as contributions would be deemed to be made next of basic tax rate.
