Need a QUICK spot of advice please

System
System Posts: 100,534 🤖 Admin 🤖
edited June 18 in AAT student discussion
Can anyone please explain how these following scenarios would be treated in a personal tax comp.
Mrs x received £250 from her company as re-imbursment of entertainment costs

She had a company loan of £15000 on which she pays intst at 2% p.a No capital repayment of the loan has been paid (what does this mean?????)

Sorry for askin for a quick response, I am just panicking witht this practice paper

Cheers

Comments

  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Need a QUICK spot of advice please

    Not 100% sure on the entertainment reimbursement, although I would say that as she is being reimbursed for her outlay then it should be ignored for the personal tax computation (she would have paid for it initially out of her own income so to include it would be double counting it, in my opinion).

    With regards to the company loan, this is a taxable benefit in so far as it is at a beneficial rate. I'm not sure of the inland revenue's average rate of interest you are using for your tax exams, but I'm guessing it will be the same as my ATT studies and therefore 5% so therefore you will need to calculate the interest on the loan at 5% for the year and deduct the interest she has actually paid to get the taxable benefit. If she had repaid any capital (ie any of the original loan amount), then the tax calculation would need to take this in to account.

    Hope this helps.
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Need a QUICK spot of advice please

    We are in the throws of P11D's at the moment and I would agree with TLG on both points.

    The Revenue tend to charge interest on loans to employees over £5,000 at 5% and, as TLG has said, any "favourable" %age [i.e. 2% in your case] is simply deducted from the gross interest charge i.e. (5% x £15,000) - the actual interest paid.

    Regards
    Steve
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Need a QUICK spot of advice please

    thanks
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Need a QUICK spot of advice please

    Paul,

    The loan is simply 15000 x (5%-2%) so she is paying 3% interest on her loan.

    The £250 enteratainment cost just gets removed from her taxable benefits
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Need a QUICK spot of advice please

    cheers guys

Categories

Privacy Policy