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ACC3140 Lecture 3 Employment Income 1920
ACC3140 Lecture 3 Employment Income 1920
Lecture 03 –
Employment Income
OUTCOMES
• Employed or self-employed?
• Basis of assessment for an employee
• Termination payments
• National Insurance Contributions
• PAYE system
• Benefits-in-kind
• Taxable values of benefits-in-kind
• Share Incentive Schemes
• Employment expenses and pension
contributions
• Complete a self-assessment tax return
Employment income
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EMPLOYMENT AND
SELF-EMPLOYMENT handbook p40
• Personal service
• Mutuality of obligation
• Right of control
• Right of substitution and engagement of
helpers
• Provision of own equipment
• Financial risk
• Opportunity to profit
• Employee -type benefits
• Mutual intention
Balance of evidence
Hall v Lorimer
TERMINATION PAYMENTS handbook p39
a) Jane
b) Her employer
a) Jane
b) Her employer
Employers deduct
Income Tax and Paid over to HMRC,
NICs from gross with employer’s
pay NICs
CODES
• Divide answer by 10
• Letter at end
• L for basic personal allowance
OTHER CODES
• BR = basic rate
• D0 = 40%
• K = negative code
• NT = no tax
PAYE Forms
• Forms
• P11D: Reporting benefits in kind
• P45: For employee leaving
• P60: Details of salary for the year and tax/NICs
deducted
The PAYE Real Time Information (RTI) system has now been introduced. This removes
the need for end-of-year forms to be sent to HMRC showing each employee's gross pay,
tax paid and NICs for the year. Form P45 is also transmitted as part of the RTI process.
P11Ds are not required if the employer (voluntarily) deals with benefits in kind through the
RTI system.
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LECTURE ACTIVITY 1
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Trivial benefits
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BENEFICIAL LOANS
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• The annual value is the ‘rateable value’ which was
used in the calculation of domestic rules before they
were replaced by council tax
• If the property cost more than £75,000, there is an
additional taxable benefit based on the official rate
of interest.
• If the property was acquired by the employer more
than 6 years before it was first made available to
the employee, ‘market value’ is used instead of cost
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Living accommodation -
owned by employer
Less:
Rent paid by employee (xx)
xxx
Living accommodation-
example
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TAX-FREE BENEFITS
examples
• Long-service awards
• Training
• Childcare/sport
Marginal cost
LECTURE ACTIVITY 2
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EXPENSES ALLOWABLE
Other expenses
incurred wholly,
exclusively, and
necessarily in the
performance of
duties
EXPENSES ALLOWABLE
Ricketts v Colquhoun
Brown v Bullock
Fitzpatrick v IRC
PENSION CONTRIBUTIONS
Employee Employer
contributions contributions
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