Employment Benefits (Exam Questions)

Question 1 ACCA December 2006 (Modified) On 1 January 2007 Mark commenced employment as the marketing manager of Sleep-Easy plc, a hotel company. Mark is paid a salary of £3,250 (gross) per month by Sleep-Easy plc. During the period from 1 January 2012 to 5 April 2012 Mark used his private motor car for business purposes. He drove 2,500 miles in the performance of his duties for Sleep-Easy plc, for which the company paid an allowance of 16 pence per mile. On 1 January 2012 Sleep-Easy plc provided Mark with an interest free loan of £80,000 so that he could purchase a new main residence. During the period from 1 January 2012 to 5 April 2012 Mark was provided with free meals in Sleep-Easy plc’s staff canteen. The total cost of these meals to the company was £400. Calculate Marks taxable employment income from Sleep-Easy plc for the tax year 2011-12. Question 2 ACCA December 2007 (Modified) Serene is employed as a sports journalist by Backhand plc, a newspaper publishing company. During the tax year 2011–12 she was paid a gross annual salary of £26,400. Throughout the tax year 2011–12 Backhand plc provided Serene with a petrol powered motor car which has a list price of £16,400. The official CO2 emission rate for the motor car is 192 grams per kilometre. Calculate Serene’s taxable employment income from Sleep-Easy plc for the tax year 2011-12. Question 3 ACCA June 2008 (Modified) Kim is employed as a sales person by Sharp-Suit plc, a clothing manufacturing company. During the tax year 2011-12 she was paid a gross annual salary of £21,600. On 1 June 2011 Sharp-Suit plc provided Kim with an interest free loan of £12,000 so that she could purchase a new motor car. During the period from 1 June 2011 to 5 April 2012 Kim used her private motor car for business and private purposes. She received no reimbursement from Sharp-Suit plc for any of the expenditure incurred. Kim’s mileage during this period included the following:

Miles Normal daily travel between home and permanent workplace 3,400 Travel between permanent workplace and Sharp-Suit plc’s customers 11,200

Travel between home and a temporary workplace for a period of one month 1,300 During the tax year 2011–12 Kim paid interest of £140 (gross) on a personal loan taken out on 1 January 2011 to purchase a laptop computer for use in her employment with Sharp-Suit plc. Calculate Kim’s taxable employment income from Sleep-Easy plc for the tax year 2011-12.

Question 4 ACCA December 2008 (Modified)

Peter Chic is employed by Haute-Couture Ltd as a fashion designer. During the tax year 2011-12 Peter was paid a gross annual salary of £45,600 by Haute-Couture Ltd. Throughout the tax year 2011–12 Haute-Couture Ltd provided Peter with a diesel powered motor car which has a list price of £22,500. The motor car cost Haute-Couture Ltd £21,200, and it has an official CO2 emission rate of 149 grams per kilometre. Peter made a capital contribution of £2,000 towards the cost of the motor car when it was first provided to him. Haute-Couture Ltd also provided Peter with fuel for private journeys. Haute-Couture Ltd has provided Peter with living accommodation since 1 January 2009. The company had purchased the property in 2008 for £160,000, and it was valued at £185,000 on 1 January 2009. Improvements costing £13,000 were made to the property during June 2006. The annual value of the property is £9,100. Throughout the tax year 2011–12 Haute-Couture Ltd provided Peter with two mobile telephones. The telephones had each cost £250 when purchased by the company in January 2011. On 5 January 2012 Haute-Couture Ltd paid a health club membership fee of £510 for the benefit of Peter. During February 2012 Peter spent five nights overseas on company business. Haute-Couture Ltd paid Peter a daily allowance of £10 to cover the cost of personal expenses such as telephone calls to his family. Calculate Peter’s taxable employment income from Sleep-Easy plc for the tax year 2011-12.

Question 5 ACCA June 2009 (Modified) Erigo is aged 56. He is employed as a business journalist by Economical plc, a magazine publishing company. During the tax year 2011–12 Erigo was paid a gross annual salary of £36,000 and used his private motor car for business purposes. He drove 18,000 miles in the performance of his duties for Economical plc, for which the company paid an allowance of 20 pence per mile. During June 2011 Economical plc paid £11,400 towards the cost of Erigo’s relocation when he was required to move his place of employment. Erigo’s previous main residence was 140 miles from his new place of employment with the company. The £11,400 covered the cost of disposing of Erigo’s old property and of acquiring a new property. Question 6 ACCA December 2010 (Modified)

On 31 December 2011 Joe Jones resigned as an employee of Firstly plc, and on 1 January 2012 commenced employment with Secondly plc. Joe was employed by both companies as a financial analyst. The following information is available for the tax year 2011–12: Employment with Firstly plc From 6 April 2011 to 31 December 2011 Joe was paid a salary of £11,400 per month. In addition to his salary, Joe was paid a bonus of £12,000 on 12 May 2011. He had become entitled to this bonus on 22 March 2011. On 1 May 2011 Firstly plc provided Joe with an interest free loan of £120,000 so that he could purchase a holiday cottage. Joe repaid £50,000 of the loan on 31 July 2011, and repaid the balance of the loan of £70,000 when he ceased employment with Firstly plc on 31 December 2011. During the period from 6 April 2011 to 31 December 2011 Joe’s three-year-old daughter was provided with a place at Firstly plc’s workplace nursery. The total cost to the company of providing this nursery place was £11,400 (190 days at £60 per day). During the period 6 April 2011 to 31 December 2011 Firstly plc paid gym membership fees of £1,050 for Joe. Firstly plc provided Joe with a home entertainment system for his personal use costing £4,400 on 6 April 2011. The company gave the home entertainment system to Joe for free, when he left the company on 31 December 2011, although its market value at that time was £3,860. Employment with Secondly plc From 1 January 2012 to 5 April 2012 Joe was paid a salary of £15,200 per month. From 1 January 2012 to 5 April 2012 Secondly plc provided Joe with living accommodation. The property has an annual value of £10,400 and is rented by Secondly plc at a cost of £2,250 per month. On 1 January 2012 Secondly plc purchased furniture for the property at a cost of £16,320. The company pays for all of the running costs relating to the property, and for the period 1 January 2012 to 5 April 2012 these amounted to £1,900. During the period 1 January 2012 to 5 April 2012 Secondly plc provided Joe with 13 weeks of childcare vouchers costing £100 per week. Joe used the vouchers to provide childcare for his three-year-old daughter at a registered nursery near to his workplace. During the period 1 January 2012 to 5 April 2012 Joe used Secondly plc’s company gym which is only open to employees of the company. The cost to Secondly plc of providing this benefit to Joe was £340. During the period 1 January 2012 to 5 April 2012 Secondly plc provided Joe with a mobile telephone costing £560. The company paid for all of Joe’s business and private telephone calls. Calculate Joe’s taxable employment income from Sleep-Easy plc for the tax year 2011-12.

Question 7 ACCA December 2011 (Modified)

William is aged 23. He is employed as a security consultant by Crown plc, a company that supplies security services. During the tax year 2011–12 William was paid a gross annual salary of £182,700 and Crown plc provided William with a petrol-powered motor car which has a list price of £83,100. The motor car cost Crown plc £78,800, and it has an official CO2 emission rate of 237 grams per kilometre. Crown plc also provided William with fuel for private journeys. During the tax year 2011–12 William made contributions of £8,000 to Crown plc in respect of the motor car. This consisted of £4,800 for the use of the motor car, and £3,200 towards the cost of fuel for private journeys. The total cost of the fuel for private journeys was £4,400. Calculate William’s taxable employment income from Sleep-Easy plc for the tax year 2011-12.

Question 8 ACCA June 2012 (Modified)

On 6 April 2011 Flick Pick, aged 23, commenced employment with 3D Ltd as a film critic. During the tax year 2011–12 Flick was paid a gross annual salary of £23,700. Throughout the tax year 3D Ltd provided Flick with living accommodation. The company had purchased the property in 2002 for £89,000, and it was valued at £144,000 on 6 April 2011. The annual value of the property is £4,600. The property was furnished by 3D Ltd during March 2011 at a cost of £9,400. Calculate Flick’s taxable employment income from Sleep-Easy plc for the tax year 2011-12.

Question 9 December 2012 (Modified) Josie Jones is aged 42. On 1 August 2011 she commenced employment with Typo plc as a creative director. Josie is paid a salary of £15,100 per month by Typo plc. The salary is paid on the last day of each calendar month. During August 2011 Typo plc paid £11,600 towards Josie’s removal expenses when she permanently moved to take up her new employment with the company as she did not live within a reasonable commuting distance. The £11,600 covered both her removal expenses and the legal costs of acquiring a new main residence. On 1 September 2011 Typo plc provided Josie with an interest free loan of £33,000 that she used to renovate her new main residence. This loan was still outstanding at 5 April 2012. During the period from 1 August 2011 to 5 April 2012, Josie was provided with free meals in Typo plc’s staff canteen. The total cost of these meals to the company was £1,340. The canteen is available to all of the company’s employees. During the period from 1 October 2011 to 5 April 2012, Typo plc provided Josie with a diesel powered motor car with an official CO2 emission rate of 149 grams per kilometre. The motor car, which has a list price of £14,400, cost Typo plc £13,900. Typo plc does not provide Josie with any fuel for private journeys.

Calculate Josies’ taxable employment income from Sleep-Easy plc for the tax year 2011-12.