Income From Employement Flashcards
National insurance ?
Employee is subject to more expensive class 1 NIC where as self employed pay lower rate class 2 and 4
Employment status indicators
1 - if a contract of service exists then the taxpayer is regarded as an employee who is in service to an employer , opposite for contract for services as the person is rendering services to a clients
2- mutuality of obligation - employee has an obligation to provide his services personally and employer has a corresponding obligation to provide work and pay
3- Degree of control- the degree of freedom the worker possesses in deciding where how and when the work is to be performed.
4- length of engagement
Employment income
Wages and salaries
Bonuses, commissions
Expense allowances
Payment made on termination of contract
Pensions arising from employment
Non taxable employment income
Trivial benefits in kind costing no more than £50
Free or subsidised meals in staff canteen
Staff parties
Provision of a parking space
Green commuting benefits
Additional household costs incurred by homeworkers
Approved mileage allowances
Removal expenses up to £8,000
Non cash long service awards (within limits)
One mobile telephone for both business and private use
Workplace childcare, sports or recreation facilities
Employer contributions to a registered pension scheme
Approved mileage allowances
20-21 the approved rates for motor cars and vans are 45p/mile for the first 10,000 miles of business travel and 25p/mile thereafter
If the mileage allowance recieved exceeds AMAP the excess is taxable
If the mileage allowance recieved is less than the AMAP the deficit is a deductible expense
Deductible expenses
Contributions to an occupational pension scheme if deducted from pay by the employer
Subscriptions to relevant professional bodies
Payroll giving schemes donations
Travel and subsistence expenses necessarily incurred in the performance of the duties of the employment
Other expenses incurred wholly exclusively and necessarily
Disallowed expenses
Costs of employees travel between home and work except for site based employees
Entertaining expenses incurred by an employee are not normally deductible
Termination payments
Payments received on the termination of employment are fully exempt from tax if they are
Made on the death of the employee
Made because of injury
Lump sum payments made under registered pension schemes
Discretionary payments with any statutory redundancy pay are exempt up to £30,000
Employee incentive schemes
Share incentive plans - employees may be given for free or purchase shares without paying tax or NICs on the salary used for this purpose
Approved share option schemes- subject to certain conditions employees may acquire share options in the company without paying income tax or NICs on either the grant or the exercise option
Trivial benefits
Benefits costing no more than £50 are regarded as trivial
The exemption is capped at £300 per tax year
Car & fuel benefit
Car = % of list price when new + accessories - employee contribution x number of days available - any contribution for personal use
Fuel = CO2 % x 27,800x number of day’s available -
