ACCA F6 Chapter 4

1. Lower paid employees has annual earnings of less than £_________.

8,500

9,500

10,500

11,500

Explanation: Lower paid employee is an employee whose earnings in tax year are less than £8,500 in a tax year.

Explanation

Explanation: Lower paid employee is an employee whose earnings in tax year are less than £8,500 in a tax year.

2. Employees including directors who are not excluded employees may be referred to as

Directors

P11D Employees

P45 Employees

Lower paid employees

Explanation: P11D employees are excluded employees.

Explanation

Explanation: P11D employees are excluded employees.

3. Excluded employees are lower paid employees and not _____________ (with certain conditions).

Executives

Directors

Officers

Managers

Explanation: Excluded employees are the employees who are either lower paid employees and not directors or either director with no material interest and either (a) a full time working director or (b) the company is non-profit making company or is established for charitable purposes only.

Explanation

Explanation: Excluded employees are the employees who are either lower paid employees and not directors or either director with no material interest and either (a) a full time working director or (b) the company is non-profit making company or is established for charitable purposes only.

4. What is the taxable benefit percentage if SEE is provided with a company petrol car for his private use with CO2 emission of 192gm/km?

16%

20%

24%

28%

Explanation: If the emission of the car is 75gm/km or less, the taxable benefit is 5% of the list price. If the emission is between 76 - 120, the charge is 10%. Between 121 – 125, charge is 15%. For addition of every 5gm/km, there is 1% additional charge to the maximum of 35%. In this case, the CO2 emission is 192 gm that is 67gm more than 125. 13% (192-125/5) will be added in 15% that is 21%.

Explanation

Explanation: If the emission of the car is 75gm/km or less, the taxable benefit is 5% of the list price. If the emission is between 76 - 120, the charge is 10%. Between 121 – 125, charge is 15%. For addition of every 5gm/km, there is 1% additional charge to the maximum of 35%. In this case, the CO2 emission is 192 gm that is 67gm more than 125. 13% (192-125/5) will be added in 15% that is 21%.

5. Race plc pays £20,000 gross salary to WHY and a living accommodation which has annual value of £10,000 a year and cost £200,000 when it was purchased new in 2 years ago. WHY pays 7,500 to Race plc for this accommodation. The total charge to WHY for the benefit of living accommodation is:

£5,000

£7,500

£10,000

£15,000

Explanation: £10,000 is the annual value that is the amount in can earn if rented out. There is additional charge that is the excess over £75,000 of the cost by 4% [(200,000 – 75,000) X 4%] that is £5,000. Total charge in respect of accommodation is hence £15,000. Contribution by the employee is deducted from the benefit 915,000 – 7,500 = 7,500) hence only £7,500 will be added in the employment income.

Explanation

Explanation: £10,000 is the annual value that is the amount in can earn if rented out. There is additional charge that is the excess over £75,000 of the cost by 4% [(200,000 – 75,000) X 4%] that is £5,000. Total charge in respect of accommodation is hence £15,000. Contribution by the employee is deducted from the benefit 915,000 – 7,500 = 7,500) hence only £7,500 will be added in the employment income.

6. Vouchers and ______________ are taxable on all employees.

Private Car

Private Fuel

Utilities

Living accommodation

Explanation: Vouchers and living accommodation re taxable on all employees, whether P11D or excluded.

Explanation

Explanation: Vouchers and living accommodation re taxable on all employees, whether P11D or excluded.

7. DEE had a loan outstanding at the beginning and end of tax year of £3,000. What will be the taxable benefit if this is an interest free loan?

Nil

£120

£300

£3,000

Explanation: If the loan outstanding doesn’t exceed £5,000 at all times during the year, there is no taxable benefit. Hence the tax charge will be nil.

Explanation

Explanation: If the loan outstanding doesn’t exceed £5,000 at all times during the year, there is no taxable benefit. Hence the tax charge will be nil.

8. The first ____ per working days of meal vouchers are exempt.

15p

50p

75p

£2

Explanation: The first 15p per working days of luncheon vouchers are exempt. Excess is included in the earnings.

Explanation

Explanation: The first 15p per working days of luncheon vouchers are exempt. Excess is included in the earnings.

9. GEE has with basic personal allowance of £7,475 will have a tax code of:

7L

74L

747L

7475L

Explanation: First 3 digits with L for those with basic personal allowance.

Explanation

Explanation: First 3 digits with L for those with basic personal allowance.

10. Which of the following benefits is not exempt on all employees:

First £9,000 of removal expenses

Workplace parking

Employer provided uniforms

Cheap loans that do not exceed Â£5,000

Explanation: First £8,000 of the removal expense are exempt.

Explanation

Explanation: First £8,000 of the removal expense are exempt.

11. There is no taxable benefit in respect of job related accommodation provided it is necessary for the proper performance of the duties or for better performance of duties or accommodation is provided due to a ________ to the employees' security.

Risk

Danger

Security

Threat

Explanation: The third condition is that there is a threat to the employees’ security.

Explanation

Explanation: The third condition is that there is a threat to the employees’ security.

12. A person travelling abroad may claim private incidental expenses of not more than ____ for every night that he stays out of the UK.

£5

£10

£15

£20

Explanation: The rule is £10 for outside UK and £5 within UK.

Explanation

Explanation: The rule is £10 for outside UK and £5 within UK.

13. What is the taxable benefit percentage if SEE is provided with a company diesel car for his private use with CO2 emission of 155gm/km?

18%

21%

24%

27%

Explanation: If the emission of the car is 75gm/km or less, the taxable benefit is 5% of the list price. If the emission is between 76 - 120, the charge is 10%. Between 121 – 125, charge is 15%. For addition of every 5gm/km, there is 1% additional charge to the maximum of 35%. In this case, the CO2 emission is 155 gm that is 30gm more than 125. 6% (155-125/5) will be added in 15% that is 21%. Further 3% is required for diesel so the answer will be 24%.

Explanation

Explanation: If the emission of the car is 75gm/km or less, the taxable benefit is 5% of the list price. If the emission is between 76 - 120, the charge is 10%. Between 121 – 125, charge is 15%. For addition of every 5gm/km, there is 1% additional charge to the maximum of 35%. In this case, the CO2 emission is 155 gm that is 30gm more than 125. 6% (155-125/5) will be added in 15% that is 21%. Further 3% is required for diesel so the answer will be 24%.

14. Van (3400kg weight; list price £20,000) is provided to BRUSH for private use and also the fuel is provided. The CO2 emission is 250 gm/km. The benefit for van and fuel will be:

£3,000

£3,500

£7,000

£13,580

Explanation: For a van with maximum laden weight of 3,500 kg, the benefit for private use is £3,000 and if fuel for private use is provided as well, £500 are added. Hence £3,500 will be the amount chargeable to tax.

Explanation

Explanation: For a van with maximum laden weight of 3,500 kg, the benefit for private use is £3,000 and if fuel for private use is provided as well, £500 are added. Hence £3,500 will be the amount chargeable to tax.

15. What is the taxable benefit percentage if SEE is provided with a company petrol car for his private use with CO2 emission of 155gm/km?

15%

19%

21%

25%

Explanation: If the emission of the car is 75gm/km or less, the taxable benefit is 5% of the list price. If the emission is between 76 - 120, the charge is 10%. Between 121 – 125, charge is 15%. For addition of every 5gm/km, there is 1% additional charge to the maximum of 35%. In this case, the CO2 emission is 155 gm that is 30gm more than 125. 6% (155-125/5) will be added in 15% that is 21%.

Explanation

Explanation: If the emission of the car is 75gm/km or less, the taxable benefit is 5% of the list price. If the emission is between 76 - 120, the charge is 10%. Between 121 – 125, charge is 15%. For addition of every 5gm/km, there is 1% additional charge to the maximum of 35%. In this case, the CO2 emission is 155 gm that is 30gm more than 125. 6% (155-125/5) will be added in 15% that is 21%.

16. Helmet is provided with a company diesel car with CO2 emission of 139gm/km as well as fuel for private use. What will be the charge for private fuel if the list price for the car is £30,000?

£6,000

£30,000

£3,760

£2,120

Explanation: If private fuel is provided, the percentage is multiplied by £18,800. The percentage here is 20 X18,800 = 3,760

Explanation

Explanation: If private fuel is provided, the percentage is multiplied by £18,800. The percentage here is 20 X18,800 = 3,760

17. P11D employees are taxed on expenses related to living accommodation like heating, lighting, cleaning, repair & maintenance etc. If the accommodation is job-related, the benefits are limited to _______% of employees' earnings.

5

10

15

20

Explanation: The rule is these expenses are taxed subject to 10% of net earnings.

Explanation

Explanation: The rule is these expenses are taxed subject to 10% of net earnings.

18. What is the taxable benefit percentage if SEE is provided with a company petrol car for his private use with CO2 emission of 215gm/km?

33%

35%

37%

39%

Explanation: If the emission of the car is 75gm/km or less, the taxable benefit is 5% of the list price. If the emission is between 76 - 120, the charge is 10%. Between 121 – 125, charge is 15%. For addition of every 5gm/km, there is 1% additional charge to the maximum of 35%. In this case, the CO2 emission is 215 gm that is 90gm more than 125. 18% (215-125/5) will be added in 15% that is 33%.

Explanation

Explanation: If the emission of the car is 75gm/km or less, the taxable benefit is 5% of the list price. If the emission is between 76 - 120, the charge is 10%. Between 121 – 125, charge is 15%. For addition of every 5gm/km, there is 1% additional charge to the maximum of 35%. In this case, the CO2 emission is 215 gm that is 90gm more than 125. 18% (215-125/5) will be added in 15% that is 33%.

19. EEE had a loan outstanding at the beginning of the tax year of £4,000. On 5^th July 2011, he re-paid all. On 5^th October, he borrowed £4,000 and on 5^th January 2011, he borrowed further £10,000. If the loan was free of interest, the taxable benefit will be __________ if average method is used.

£720

£480

£240

£120

Explanation: Using the simple average method, the mean of the loan outstanding at the beginning and end is multiplied by 4%. So [(4,000+14,000)/2X4%)] is the answer.

Explanation

Explanation: Using the simple average method, the mean of the loan outstanding at the beginning and end is multiplied by 4%. So [(4,000+14,000)/2X4%)] is the answer.

20. EEE had a loan outstanding at the beginning of the tax year of £4,000. On 5^th July 2011, he re-paid all. On 5^th October, he borrowed £4,000 and on 5^th January 2011, he borrowed further £500. If the loan was free of interest, the taxable benefit will be __________ if strict method is used.

£125

£250

£375

Nil

Explanation: Outstanding loan does not exceed £5,000 at all times, there is no tax charge.

Explanation

Explanation: Outstanding loan does not exceed £5,000 at all times, there is no tax charge.

21. Additional rate taxpayers are eligible for free childcare vouchers worth £___ per week.

£55

£44

£28

£22

Explanation: The maximum tax saving can be £11. A basic rate taxpayer can have £55 worth of tax free childcare vouchers, higher £28 and additional rate payer £22 per week.

Explanation

Explanation: The maximum tax saving can be £11. A basic rate taxpayer can have £55 worth of tax free childcare vouchers, higher £28 and additional rate payer £22 per week.

22. Race plc pays £20,000 gross salary to WHY and a living accommodation which has annual value of £10,000 a year and cost £200,000 when it was purchased new in 2 years ago. The total charge to WHY for the benefit of living accommodation is:

£4,000

£5,000

£14,000

£15,000

Explanation: £10,000 is the annual value that is the amount in can earn if rented out. There is additional charge that is the excess over £75,000 of the cost by 4% [(200,000 – 75,000) X 4%] that is £5,000. Total charge in respect of accommodation is hence £15,000.

Explanation

Explanation: £10,000 is the annual value that is the amount in can earn if rented out. There is additional charge that is the excess over £75,000 of the cost by 4% [(200,000 – 75,000) X 4%] that is £5,000. Total charge in respect of accommodation is hence £15,000.

23. ARE was provided an electronic gadget for his personal use on 6/4/08 when its market value was £230. At the beginning of the tax year 2011/12, the market value was £60 and towards the end, it was valued at £70. The same was purchased by ARE when on 6/4/11 for £40 when its market value was £65. What will be the charge to his employment income in respect of this gadget?

£70

£65

£52

£40

Explanation: If an object previously provided for personal use is acquired by the employee; the benefit will be the higher of A. Market Value at acquisition less the amount paid (65-40=25) or B. The Market Value when first made available less the amount already taxed less price paid by employee (230 – 46 -46 – 46 – 40 = 52). Hence, £52 is the benefit for the tax year 2011/12.

Explanation

Explanation: If an object previously provided for personal use is acquired by the employee; the benefit will be the higher of A. Market Value at acquisition less the amount paid (65-40=25) or B. The Market Value when first made available less the amount already taxed less price paid by employee (230 – 46 -46 – 46 – 40 = 52). Hence, £52 is the benefit for the tax year 2011/12.

24. EEE had a loan outstanding at the beginning of the tax year of £4,000. On 5^th July 2011, he re-paid all. On 5^th October, he borrowed £4,000 and on 5^th January 2011, he borrowed further £10,000. If the loan was free of interest, the taxable benefit will be __________ if strict method is used.

£720

£480

£220

Nil

Explanation: £4,000 repair within 3 months so 4,000 X 4% X 3/12; then £4,000 borrowed for rest of 6 months so 4,000 X 4% X 6/12; then £10,000 X 4% X 3/12; total is £220.

Explanation

Explanation: £4,000 repair within 3 months so 4,000 X 4% X 3/12; then £4,000 borrowed for rest of 6 months so 4,000 X 4% X 6/12; then £10,000 X 4% X 3/12; total is £220.

25. ARE was provided an electronic gadget for his personal use in 2008 when its market value was £230. At the beginning of the tax year 2011/12, the market value was £60 and towards the end, it was valued at £70. What will be the charge to his employment income in respect of this gadget?

£230

£70

£60

£46

Explanation: The value added to the earnings will be 20% of the market value of the asset when it is first provided for private use. Hence it will be £46 (230X20%).

Explanation

Explanation: The value added to the earnings will be 20% of the market value of the asset when it is first provided for private use. Hence it will be £46 (230X20%).