Home For AAT student members AQ 2013 AAT Level 4 (Level 8 in Scotland)

PTAX Question

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

Comments

  • PeterCPeterC Registered, Tutor Posts: 163
    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)
  • JoshhSwFcJoshhSwFc Registered Posts: 9
    Thanks a lot PeterC
  • JoshhSwFcJoshhSwFc Registered Posts: 9
    edited January 2017
    Could you also explain the bottom part of this question please?

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  • KaiiKaii Registered Posts: 5
    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!
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