The motor car will be provided throughout the tax year 2020/21, and will be leased by Smark Ltd at an annual cost of £27,630. The motor car will be petrol powered, will have a list price of
£80,000, and will have an official CO2 emission rate of 190 grams per kilometre.
The employer's Class 1A NIC liability in respect of the car benefit will be £4,085 (29,600 at
13.8%).
The motor car has a CO2 emission rate in excess of 110 grams per kilometre, so only
£23,486 (27,630 less 15%) of the leasing costs are allowed for corporation tax purposes
.
Smark Ltd's corporation tax liability will be reduced by £5,238 (23,486 + 4,085 = 27,571 at
19%)
QUESTION - what is the net benefist of providing the car
ANSWER IN THE TEXT - net of tax cost of £26,477 (27,630 + 4,085 – 5,238).
DOUBTS - isn't the above answer wrong since the net tax cost should be net of tax cost of £2991 (27,630 + 4,085 – 5,238- £23,486{the capital allowance provided for the car )
Ask the Tutor ACCA TX-UK
NIC AND BENEFITS
There are no capital allowances, it has not been purchased by the company, it has been leased - the tax relief is given for the lease costs - and the question must be to compute the net tax cost - not the "benefit"
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