EMPLOYMENT EARNINGS AND PENSION INCOME

1
EMPLOYMENT EARNINGS AND PENSION INCOME

• UK EMPLOYMENTS
• EARNINGS ON RECEIPTS BASIS
• SALARY/WAGES/BONUSES ETC
• ALL OTHER PROFITS FROM EMPLOYMENT-GENERALLY ALL
  SUMS TO WHICH CONTRACTUALLY ENTITLES
• SHILTON V WILMSHURST

2
EXPENSE ALLOWANCES

• Reimbursed expenses strictly taxable as
  emoluments but employee can claim allowable
  expenses as an offset
• Dispensations may give effective exemption
• Motor Expenses ok if within limits
• Round sum allowances (i.e. no element of direct
  reimbursement) treated as income
• Employee can claim deduction for allowable
  expenses-but not entertaining

3
TAXATION OF BENEFITS

• APPLIES IN ALL CASES TO P11D EMPLOYEES/DIRECTORS
• IF RECEIVED BY EMPLOYEE OR THEIR FAMILY BY
  REASON OF EMPLOYMENT (EMPLOYER)
• GENERAL RULE-VALUED AT COST TO EMPLOYER
• NET OF CONTRIBUTIONS BY EMPLOYEE
• SPECIAL RULES RE CARS/ACCOMMMODATION/LOANS/SHARES

4
GENERAL RULES

• COST-ER BUYS IN SERVICES/ NEW GOODS- AT PRICE
  PAID-APPORTIONED AS NECESSARY FOR SERVICES
• COST-ER PROVIDES OWN SERVICES OR GOODS
  IN-HOUSE-AT MARGINAL COST
• ER PROVIDES USE OF ASSETS-20 OF COST OR HIRE
  CHARGE IF MORE
• ER PROVIDES USED ASSET- 2ND HAND VALUE SUBJECT TO
  ANTI-AVOIDANCE RULE

5
COMPANY CARS

• ANY PRIVATE USE
• 15-35 BASED ON LIST PRICE LESS CONTRIBUTION OF
  MAX 5,000
• /CO2 EMISSIONS
• SCALED DOWN FOR USE IN PART OF YEAR
• DEDUCTION FOR CONTRIBUTION TO RUNNING COSTS
• SEPARATE CHARGE RE PRIVATE FUEL-ALL OR NOTHING

6
PREFERENTIAL LOANS/LIVING ACCOMMODATION

• LOANS EXEMPT UP TO 5,000
• TAXED ON DIFFERENCE BETWEEN INTEREST PAID AND
  OFFICIAL RATE
• LIVING ACCOMMODATION- LIMITED EXEMPTION
• BASED ON RATEABLE VALUE
• EXCESS OVER COST OF 75,000 CHARGED AT OFFICIAL
  RATE
• DEDUCTION FOR RENT PAID BY EMPLOYEE

7
EXEMPTIONS

• Concessions- luncheon vouchers, certain
  educational courses funded by employer
• Employers contribution to approved pension fund
  (within set limit)
• Meals in staff canteen open to all
• Staff parties up to 75 per person p.a
• Provision of medical treatment/insurance re
  overseas duties only

8
EXEMPTIONS cont

• Removal exes if reasonable up to a maximum of
  8,000
• Provision of creche facilities provided singly or
  jointly by employer
• Provision of car/motorcycle/bicycle parking
  facilities at or near workplace
• Sporting and recreational facilities generally
  available

9
EXEMPTIONS cont 2

• Incidental personal expenses on work-related
  overnight stays (5 or 10 if ex UK)
• Provision of mobile phones
• Directors liability insurance
• Use of computer equipment up to annual value of
  500-but not if only to directors or on
  favourable terms to directors

10
EXPENSES RULE

• General wholly exclusively and necessarily in
  the performance of the duties
• Ricketts v Colquhoun
• Pook v Owen
• Simpson v Tate
• Brown v Bullock
• Hillyer v Leeke

11
EXPENSES RULE

• Smith v Abbott
• New rule for travelling expenses- expenses of
  business travel ok but not ordinary commuting
• Overrides Elderkin v Hindmarsh
• Note statutory overrides (as usual) - -
  prohibition re entertaining but allowability for
  professional subs, approved pension
  contributiuons etc

12
NIC

• Class 1 Employees on gross money salary within
  threshold
• Class 1 employers on gross money salary with no
  upper limit
• Class 1A-employers only- on benefits in kind
• Operates on weekly/monthly basis annual for
  directors