PTC help!

Piplet

I'm doing some last minute revision before personal tax before the exam on Friday! I have two questions which I have come across from studying with Osbourne books:

1. If someone has a loan from an employer which is tax free and above £5k but is paid off in full during the tax year, is there still an assessable benefit?

2. If someone is employed for part of the tax year and has benefits which are assessable i.e. company car etc are they still chargeable but only for the months they were employed?

Sorry if this is a bit of a simple question but I want to be sure before my exam on Friday!!

reader

I'm not to sure about loans but I think your statement about company cars is correct

reddwarf

There is a lower limit for loans 4K springs to mind...

reader

I think, with loans, the limit that has to be crossed before benefits come into play is £5,000.

I'm assuming that the benefit would have to be time apportioned if the loan was paid back part way through the year..

reader

Also in PTC

Regarding accomodation benefit, more specifically provision of services, what does the kaplan text book mean by 'other employment income'?

Does other employment income = employment income + self employment income + property income?

debihargrave

The loan will be time apportioned
i.e loan of 6,000 paid back within 6 months
6,000 x 4.75% (offiicial rate in my book) /12 x 6 =£142.50

Cars and fuel benefit will also be time apportioned
mileage allowance not time apportioned (if paying for your own fuel)


I think I have this right in my head too

reader

Hi debihargrave,

I agree with what you've stated but don't understand what you mean when you say

"mileage allowance not time apportioned (if paying for your own fuel)"

Do you mean fuel benefit (not mileage allowance)?

debihargrave

mileage allowance when using your own car!
say the company paid you 50p per mile and you did 15,000 miles
as you had been paid 50p x 15,000
the benefit you would add on would be
10,000 x(50p-40p) =£1000
5,000 x(50p-25p) =£1250
TOTAL £2250
I hope this helps

fuel benefit is based on a company car which would be £16900 x ?% (car benefit %) then time apportioned if need be

reader

Thanks,

also I'm currently studying benefits, more specifically gifts and use of assets.

When an employee gets a second hand benefit a calculation has to be done (e.g. opening market value less benefits paid less contribution) and the answer has to be compared with current market value.

However in my book (Kaplan) it says that this does not apply to cars and bikes, and in the capital gains section, cars are not a chargeable asset.

So how are the sale/gift of cars dealt with for tax purposes?

NickyW

debihargrave wrote: »

The loan will be time apportioned
i.e loan of 6,000 paid back within 6 months
6,000 x 4.75% (offiicial rate in my book) /12 x 6 =£142.50

Is this the right answer?

reader

I think so, because the benefit has been calculated and time apportioned accordingly.

The only other way would be to use the "Strict method", i.e. calculate the interest on the liability on a daily basis (for the 6 month period). In this situation you would have to know the amounts repaid and when they were repaid.

In the exam, if they give us repayment details then I think using the "Strict method" would be better. However if no repayment details are given then I think time apportioning the loan benefit would result in a similar and acceptable answer for exam purposes.

reader

I've just done a Kaplan question:

Lai was provided with an interest free loan of £20,000 on 1 January 2006.

She repaid the loan on 31 December 2009.

The official rate of interest is 4.75%.

Answer:

20,000 x 4.75% x 9/12 = £712 of loan benefit