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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 SleepEasy plcs 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 201112 she was paid a gross annual salary of 26,400. Throughout the tax year 201112 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 Serenes 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. Kims mileage during this period included the following: Normal daily travel between home and permanent workplace Travel between permanent workplace and Sharp-Suit plcs customers Miles 3,400 11,200

Travel between home and a temporary workplace for a period of one month

1,300

During the tax year 201112 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 Kims 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 201112 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 201112 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 Peters 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 201112 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 Erigos relocation when he was required to move his place of employment. Erigos previous main residence was 140 miles from his new place of employment with the company. The 11,400 covered the cost of disposing of Erigos 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 201112: 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 Joes three-year-old daughter was provided with a place at Firstly plcs 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 threeyear-old daughter at a registered nursery near to his workplace. During the period 1 January 2012 to 5 April 2012 Joe used Secondly plcs 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 Joes business and private telephone calls. Calculate Joes 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 201112 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 201112 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 Williams 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 201112 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 Flicks 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 Josies 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 plcs staff canteen. The total cost of these meals to the company was 1,340. The canteen is available to all of the companys 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.