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Sir could you solve this question aswell. As I am really new to the subject of taxation.
Mary works for AB (uk) Ltd a large company and earns an annual gross salary of £50000.
During the tax year 2014/15 she had use of diesel car, with co2 emission rate of 16f grams per kilometer and a recommended list price of £15000. The car was first provided on Mary on 6 September 2014 for both private and business use.
The company pays for all the running cost of the vehicle , which amounted to £1800 for the period to 5 April 2015.
Mary was required to contribute £20 per month towards the private use of the car and £10 per month towards the cost of private fuel.
Required: calculate the total value benefits provided to marry for the purpose of income tax. For the tax year 2014/15
Thankyou soo much sir.
Mary works for AB (uk) Ltd a large company and earns an annual gross salary of £50000.
During the tax year 2014/15 she had use of diesel car, with co2 emission rate of 166 grams per kilometer and a recommended list price of £15000. The car was first provided on Mary on 6 September 2014 for both private and business use.
The company pays for all the running cost of the vehicle , which amounted to £1800 for the period to 5 April 2015.
Mary was required to contribute £20 per month towards the private use of the car and £10 per month towards the cost of private fuel.
Required: calculate the total value benefits provided to marry for the purpose of income tax. For the tax year 2014/15
166g rounded down to nearest multiple of ‘5’ = 165g
165g-95g = 70, 70/5 = 14. 14*1% = 14%. 14% + base 12% + 3% for diesel = 29%
This 29% is used to work out both the car benefit and the fuel benefit
Car Benefit:
List price £15,000 x 29% x 7/12 = 2538
Less:
Contribution to use 20*7 = (140)
Car benefit = 2398Fuel Benefit:
21,700 (this figure is the same for all cars, regardless of list price) x 29% x 7/12 = 3671
Contribution to fuel is ignored unless the contribution accounts for 100% of the fuel provided. There is no partial reduction.
Although the question doesn’t seem to state the amount of the fuel provided for private use (all the practice questions I’ve done so far usually indicate this value) I assume that the running costs of £1800 include some fuel costs and that it is safe to assume that 10*70 = £70 isn’t covering 100% of this proportion.
I’d wait for the tutor to answer but I’m fairly confident my answer is correct.
@twistedheat
I think the list price 15000 should be reduced by the running cost paid by the employer 1800 else you have done it perfectly.Not sure about that, as far as I know list price is only reduced by a max of £5,000 from capital contribution made by the employee specifically towards the cost of the car itself, not towards running costs.
Are any of you appearing for f6 in june?(: if yes, could I get anyone’s whatsaap number, as it’l be a great help to study the subject and ask questions from each other. Thankyou!
The answer given by twistedheat looks technically correct including the point about capital contributions by the employee so assuming the calculations are then performed correctly you have your answer – for the future only attempt practice questions for which answers are provided!
Sir, when do we subtract gifts donation from employees net income and do we not? Cause in some question they subtract it from the employee net income and sometimes they don’t. Instead directly take it for the calculation of tax liability.
And, if the question is silent. We assume it’s adjusted net income?
In calculating the net income figure on the face of the income tax computation we NEVER deduct gift aid payments.
They are instead deducted in a separate calculation of adjusted net income that would be used in determining any deduction in the personal allowance due to the level of income and possibly age of the taxpayer.
You must not confuse gift aid payments made to a charity with donations made by employees under the payroll deduction scheme! Employee contributions under the payroll deduction scheme are indeed deducted from employment income in computing the level of employment income that will be included on the income tax computation.
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