PT16 & 17 INTRO TO EMPLOYMENT INCOME AND BENEFITS + Car Benefits Flashcards
‘Employment income’ means:
remuneration paid in monetary form (salaries and wages
etc) and non-monetary form (such as benefits and share option gains)
Rules for Employees
Employees are charged to income tax on ‘net taxable earnings’ received in the tax year, which is earnings less any allowable deductions.
Employees are taxed on earnings at the date of receipt. For cash payments, this means
the earliest of:
- the date that the payment is physically made; or
– the date the employee becomes legally entitled to the payment
Rules for Directors
For directors, the date of receipt is the earliest of:
* ‘Rule 1’ – the date that the payment is physically made;
* ‘Rule 2’ – the date the director becomes legally entitled to the payment; or
* ‘Rule 3’ – the earliest of:
a. the date when the sums on account of the director’s earnings are credited in the company accounts; or
b. at the end of the company’s accounting period if the earnings have been determined by the end of that period; or
c. at the date the earnings are determined if that date falls after the end of the company’s accounting period.
The taxable amount of a benefit is its…
‘cash equivalent’, which is usually the ‘cost to the employer of providing that benefit’. There are special rules to determine the cash equivalent of certain benefits such as company cars or loans.
An employer can register with HMRC to ….
include taxable benefits (other than accommodation and beneficial loans) in the payroll.
If a benefit is not included in the payroll it must be reported by the employer on form P11D.
Form P11D should be submitted to HMRC no later than …
6 July after the end of the tax year.
Income from pensions is …
generally taxable. This includes the UK state pension and any
pension income paid by a former employer.
Tax free state benefits…
child benefit, council tax benefit, housing benefit, working tax credits and child tax credits.
Taxable social security benefits are taxable
jobseeker’s allowance and incapacity benefit.
How do we calculate car benefit?
(include rules about accessories)
List price when new
Add accessories (if under £100 and second hand, ignore)
Deduct capital contribution
This is your revised list price
Revised list price x %
Less: non availability (months not available /12)
Less: contributions for private use
= car benefit
For car benefit non availability deductions are available when….
the car is off the road for 30 days (ie only in whole months)
Classic cars ?
15 or more years old and worth £15,000 or more at the end of the tax year.
Market value is used instead of list price.
Where fuel is provided for private motoring, the taxable benefit is:
£25,300 × % (based on CO2 emissions)
Fuel benefits cannot be reduced by employee contributions but can be time-apportioned if appropriate.
What if employee contributes to their own fuel?
Fuel benefits cannot be reduced by employee contributions but can be time-apportioned if appropriate.
What if employer pays for electricity for an electric car?
Electricity is not a fuel, so fuel benefit does not apply to electric cars.
If the employer provides a workplace charging point for electric company cars or pays for a vehicle charging point in respect of an electric company car to be installed at an employee’s home, this is an exempt benefit
