1. PTAX Personal Taxation
Employment
(Salaries, Bonuses, Pensions)
FA2015

2. Objectives To be able to:
Decide whether a taxpayer is employed or self-employed
Decide when employment income is taxable
Assess the taxable amount on a variety of benefits in kind
Identify expenses which are allowable in calculating taxable income
Explain record-keeping requirements

3. Indicators of Self-Employment (Contract for Services)
How do you decide if a taxpayer is self-employed?

4. Income received + benefits in kind - allowable deductions
Employment Income
Income received + benefits in kind - allowable deductions

5. Taxation of Employment Income
Is employment income taxed on a receipts or accrual basis?
Questions EMP1, EMP2, EMP3

6. Taxable Benefits

7. General Rule (P11D employees)
If an employer provides an employee with a benefit, how do you determine the taxable amount?

8. Employee contribution
Is the tax affected if an employee contributes to the cost of a taxable benefit?
Reduces benefit (except fuel)

9. Company Car Benefit
List price – employee contribution x scale charge % - employee contribution to running cost

10. Scale Charge %
Below 95g/km: see data sheet 95g/km: 14% +1% per 5g/km Diesel: +3% Max 37%

11. £22,100 x scale charge % Ignore part contribution
Fuel Benefit
£22,100 x scale charge % Ignore part contribution

12. Car & fuel benefits are time-apportioned if the car is not available for the whole tax year
Timing

13. Pool Car
When is this not a taxable benefit?

14. Company Van
What is the taxable benefit?
Questions TB1, TB2, TB3, TB4

15. Beneficial Loan Loan x (Official interest – Actual interest)
No benefit if total loans <£10,000
If loan written off:
Benefit = Amount of loan
Questions TB5, TB6

16. Opening Balance + Closing Balance
Beneficial Loan
If the loan changes during the year, use:
Opening Balance + Closing Balance 2
Questions TB7, TB8

17. Accomodation Annual value (or rent paid by employer if higher)
+(Cost - £75,000) x Official interest
+ Cleaning etc
+ Assets x 20%
Time apportioned

18. Accomodation Exempt for In these cases:
Representative occupier (Caretaker)
Customary (Vicar)
Security
In these cases:
Running expenses limited to 10% of earnings
Questions TB9, TB10

19. Gift/Loan of Asset
What is the befit in kind for:
Gift
Loan

20. Gift of asset previously loaned
Higher of:
market value when transferred
market value when first provided less previous taxable benefit
Less employee contribution
Questions TB11, TB12

21. Tax-free benefits

22. Tax-free benefits Money:
First £30,000 redundancy (not strictly a benefit)
£8,000 relocation
£5,000 suggestion scheme,
long service award (20yrs, £50/yr)
£5 per night incidental expenses (£10 overseas)
£4/week for work at home
Goodwill gifts <£250, entertainment

23. Tax-free benefits employers pension contribution
one mobile phone + calls
Childcare:
workplace creche
£55/28/25 approved childcare
Staff canteen
Staff entertainments (£150pa per person, events above this disallowed)

24. Tax-free benefits Transport: Other: use of bicycle company bus
workplace parking
Other:
sports facilities
counselling
eye checks
certain state benefits

25. Wholly, exclusively, necessarily in performance of duties
Allowable deductions
Wholly, exclusively, necessarily in performance of duties

26. Allowable deductions
What is allowable?

27. Home to normal workplace travel
Not Allowable
Home to normal workplace travel
Questions AD1, AD2

28. Allowable deductions: questions
In which of the following cases will the expenses described be allowable against the employee’s income for tax purposes? a) A bank manager voluntarily pays an annual subscription to a London club. He uses the club only for the purpose of meeting the bank’s clients. No

29. Allowable deductions: questions
b) A workman is required to provide his own tools and protective clothing. c) A clerk pays to attend a college course in the evenings, so as to gain qualifications and improve her career prospects. d) The finance director of a company pays an annual subscription to the Institute of Chartered Accountants.

30. Allowable deductions: questions
e) A college lecturer teaches at the main college building and then drives to one of the college’s annexes to take his next class. He pays his own travel costs. f) A barrister living and practising in London is appointed Recorder of Portsmouth. He pays his own travel costs between London and Portsmouth.

31. Dispensation
What is a Dispensation?

32. Records to keep
P60
P11D
P45
Receipts
Tax return
Questions TB13, AD3

33. HOMEWORK
Read chapter 4
Tutorial book questions, 4.2, 4.3, 4.1, 4.5, 4.6, 4.7, 4.8