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NIC AND BENEFITS

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA TX-UK Exams › NIC AND BENEFITS

  • This topic has 1 reply, 2 voices, and was last updated 3 years ago by Tax Tutor.
Viewing 2 posts - 1 through 2 (of 2 total)
  • Author
    Posts
  • November 3, 2021 at 11:21 am #639833
    shaunak22
    Participant
    • Topics: 220
    • Replies: 41
    • ☆☆☆

    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 )

    November 3, 2021 at 12:17 pm #639841
    Tax Tutor
    Member
    • Topics: 2
    • Replies: 3965
    • ☆☆☆☆☆

    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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