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Hi,
I was wondering if you could explain to me why additional cost of commuting for 2013/2014 of 1,800 are not deducted from employment income in following example? According to the OT F6 course notes (pg. 60) Travel expenses incurred necessarily in the performance of the duties of employment are deductible from employment income.
Kaplan exam kit, question 3 (Ali Patel)
Ali Patel has been employed by Box plc.
1. Ali’s annual salary is 29,000
2. Ali commutes on a daily basis using his private motor car.
3. He will be paid additional salary of 500 per month
4. Box plc will pay Ali an allowance of 38p per mile for the 1,600 miles that Ali will drive each month commuting to the office
5. Ali’s additional cost of commuting for 2013/2014 will be 1,800Solution:
Salary (29,000 + (500*12)) = 35,000
Mileage allowance = 496
Employment income = 35,496less: P.A. = (9,440)
Taxable income =26,056Thank you in advance.
As the OT course note correctly says – travel expenses incurred personally by the employee in the performance of the duties of employment would indeed be deductible.
In the Kaplan example you quote Ali has not incurred such expenses but in fact has been paid additional salary and a mileage allowance by the company for his travel to and from work.
This is not a cost incurred in the performance of his duties but merely the cost of getting to and from the place of work. This would not be an allowable expense if incurred by Ali and is indeed as here an assessable benefit when paid for by the employer.
A travel expense incurred in the performance of duties would for example be travel to a client’s office.Thank you so much for your explanation. It is much appreciated and everything is clear now 🙂
This is still not making sense to me.. Home to Temporary workplace should be deducted from Employment income..This is the same case.. Home to temporary workplace is 1800. So why this is not deductible?
Do not know what the current version of this question says to be able to answer your question, but if a temporary work place then if expenses are incurred by employee then they would be deductible but if a mileage allowance is already being paid to cover this mileage there would be no additional deduction for expenditure incurred.
If this is still in Kaplan text write to Kaplan and ask them to explain.
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