Advise …Ltd of corporation tax and NIC implications for year ended 5Apr14 if..

hi,

I am not seeing how to answer this question:

You should assume that today’s date is 20 March 2013.

Sammi Smith is a director of Smark Ltd. The company has given her the choice of being
provided with a leased company motor car or, alternatively, being paid additional director’s remuneration and then privately leasing the same motor car herself.

Company motor car

The motor car will be provided throughout the tax year 2013–14, and will be leased by Smark Ltd at an annual cost of £27,720. The motor car will be petrol powered, will have a list price of £82,000, and will have an official CO2 emission rate of 300 grams per kilometre.
The lease payments will cover all the costs of running the motor car except for fuel. Smark Ltd will not provide Sammi with any fuel for private journeys.

Additional director’s remuneration

As an alternative to having a company motor car, Sammi will be paid additional gross
director’s remuneration of £28,000 during the tax year 2013–14. She will then privately lease the motor car at an annual cost of £27,720.

Other information
The amount of business journeys that will be driven by Sammi will be immaterial and can
therefore be ignored.

Sammi’s current annual director’s remuneration is £100,000. Smark Ltd prepares its
accounts to 5 April, and pays corporation tax at the full rate of 24%. The lease of the motor car will commence on 6 April 2013.

Advise Smark Ltd of the corporation tax and National Insurance contribution
implications for the year ended 5 April 2014 if the company (1) provides Sammi Smith
with the company motor car, and (2) pays Sammi Smith additional director’s
remuneration of £28,000.

ANSWER: Smark Ltd’s corporation tax liability will be reduced by £6,606
(23,562 + 3,961 = 27,523 at 23%). for the company car

Smark Ltd’s corporation tax liability will be reduced by £7,647
(28,000 + 3,864 = 31,864 at 24%) for the additional remuneration.

^regarding this question. Why is the answer a corporate tax reduction? I am very confused and it is probably very obvious. But, I cannot see an explanation for this.

Regards,
Yazan