PTAX Question

JoshhSwFc

An employer offered interest free loans to each of his employees as follows:

Jules received the following interest free loans. She has not repaid any of these loans.

01/01/13 4000
01/01/16 5000
01/01/17 3000

Using the average method, what is Jules's assessable benefit in kind on these loans in 16/17?

The answer is £315. I may be acting dumb at this time in a morning but I need some guidance!

Much appreciated

PeterC

Loan at 6/4/16 is £9,000
Loan at 5/4/17 is £12,000
Average = (9000+12000)/2 = 10,500
Benefit = 10,500 x official interest rate (given in the question or accompanying tax data)

JoshhSwFc

Thanks a lot PeterC

JoshhSwFc

Could you also explain the bottom part of this question please?

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Kaii

Hi Josh,

The answer would be £1650 - this is because Lou is not a connected persons, therefore we would use the proceeds in the calculation of the gain. Therefore:

42,000
(20650)
Gives chargeable gain of
21350
Less annual exempt amount
(11100)
Taxable gain: 10250.

Since Lou has 4000 remaining in his basic rate tax band (32000 - 28000)
4000 of the taxable gain is charged at 10% to give £400
and the remaining 6250 is charged at 20% to give £1250

Total of £1650 capital gains tax payable. Hope that helps!