Question

Laurence is employed by House Ltd throughout 2017/18 as a management consultant. His remuneration package is as follows: i) ii) His salary for the year is £55,000. In addition he has unlimited free use of the workplace gym. The annual subscription of a similar gym near to his place of work is £6,000. ii) He does not have use of a company car, so uses his own car for business travel. During the year he travelled 18,200 miles on business and his employer reimbursed him for this, at the rate of 48p per mile. iv) His employer had previously made an interest-free loan to him of £15,000. This loan was outstanding throughout 2017/18 and Laurence will start to repay it in 2018/19. v) He is provided with the use of a flat. It cost his employer £300,000 to buy. Laurence pays all the bills associated with the flat's running and makes a £150 a month contribution to his employer for the use of the flat. The flat has an annual value of £6,000 per year. vi) Throughout the year he was provided with a mobile phone at an annual cost to his employer of £432. Laurence also uses this phone for some private calls. Required a) Show the taxable value of each of the elements of Laurence's' remuneration package interest is 3%. 13 marks b) Explain the rules that allow a taxpayer to live away from his or her principal private residence (PPR), while still being deemed resident for CGT purposes. 7 marks

tax tables:

Rates and allowances

INCOME TAX (2018/19)

%

Basic rate £1 – £34,500 20%

Higher rate £34,500 – £150,000 40%

Additional higher rate £150,001 onwards 45%

A starting rate of 10% applies to savings income where it falls within the first £5,000 of taxable income.

Personal allowances (2018/19)

       £

Personal allowance    11,850

Car fuel benefit (2018/19)

The base figure for calculating the car fuel benefit is £23,400.

Approved mileage rates (2018/19)

Car and vans: 0 – 10,000 miles 45p per mile

10,000+ miles 25p per mile

Motor cycles 24p per mile

Bicycles 20p per mile

CAPITAL GAINS TAX (CGT) (2018/19)

Standard rate of CGT     10%*

Higher rate of CGT     20%*

Entrepreneurs’ relief rate     10%

Annual exemption £11,700

Entrepreneurs’ relief        £10,000,000

*An 8% surcharge applies in respect of residential properties.

NATIONAL INSURANCE (NI) (2018/19)

CLASS 1 (primary)

Earnings up to £162 a week Nil

Earnings between £162 and £892 12%

Earnings over £892 a week 2%

CLASS 1 (secondary)

Earnings up to £162 a week Nil

Earnings over £162 a week 13.8%

CLASS 2

Weekly Contribution – £2.95

Small earnings exception - £6,205

CLASS 3

Weekly contribution - £14.65

CLASS 4

Lower profits limit £8,424

Upper profits limit £46,350

Rate on profits between upper and lower limit – 9%

Rate on profits beyond upper limit - 2%

Answer 1