What are the tax regulations for an employee receiving vouchers, accommodation, and cars when working at a company having formation of United Kingdom?


04 Jan

There are different tax regulations, tax benefits, and reliefs in case of the employee when he/she receives vouchers, accommodation and all these aspects will be discussed in this blog along with regulations in the scenario of usage of cars given by company having formation of United Kingdom that he/she works for or used for private or business purposes.

Employee Acquiring Vouchers

In the case if any employee (excluded employee included) acquires vouchers of cash or the vouchers exchangeable for cash, makes use of a credit token such as a credit card in order to acquire money, services and goods, or the employee obtains the exchangeable vouchers such as tokens of books (also known as the non-cash vouchers), then their taxation is done on the cost of providing the advantage, minus any amount made good.

In the case where a voucher is given for the purpose of a benefit that is not included in the income tax, then the provision of the voucher itself is also excluded.

Employee Acquiring Accommodation

In case of accommodation the benefit is the annual value. In case if the property costs the employer over £75,000, then there is an additional benefit in this special case.

The value of accommodation liable to tax which is provided to an employee (excluded employee included) is the rent that would have to be paid if the letting of the premises would have been done at an amount equal to their yearly value (considered as their relatable value). If the renting of the premises is done instead of being owned by the employer, then the benefit liable to tax is the higher of the rent whose payment is actually made and the yearly value. In case if the property does not have a relatable value, then HMRC makes the estimate of a value. An additional amount is to be charged in the case if a property costs the employer over £75,000.

The value of the provision of the living accommodation is the aggregate of the purchasing cost and the cost of improvements made prior to the beginning of the year of tax for which the computation of the benefit is being done. Hence, it is not possible to avoid the charge through the purchase of an inexpensive property needing substantial repairs and making improvement in it.

In case if the acquisition of a property was done more than the duration of six years prior to being provided first to the employee, the market value when first provided plus the value of subsequent improvements is utilized as the value of provision of accommodation. However, until and unless the actual value plus the improvements to the beginning of the year of tax in question is more than £75,000, then the imposition of the additional charge cannot be done, irrespective of the market value being high. Also, the imposition of the additional charge can only be done if the employer is the owner of the concerned property (instead of the rents).

As far as the accommodation related to job is concerned, then in this case, there is no taxable benefit. A person lives in an accommodation related to job in the case if:

  • It is provided for the better performance of the duties of employees and the employment is for a kind in which the accommodation should be provided, such as the case of a policeman, or
  • It is mandatory for the proper performance of the duties of the employees as in the case of a caretaker, or
  • There is a threat to the security of the employee and the usage of the accommodation is a part of the arrangements of the security.

The directors can only make a claim of exemptions in the case if they have no material interest (material means more than 5%) in the ltd company formation UK where they are working and if either they are full time working directors or that ltd company formation UK is a charity or non-profit making company.

Any contribution whose payment is made by the employee is subtracted from the yearly value of the property and then from the additional benefit.

In case if the employee is provided with a substitute of cash to living accommodation, the benefits code is still applicable in priority to the treatment of cash alternatives in the form of earnings. If such a scenario occurs that the cash alternative is greater than the benefit liable to tax, then the treatment of excess is done in the form of earnings.

Living Accommodation Expenses

The taxation of the employees other than the excluded employees, in addition to the benefit of living accommodation itself, is done on the related expenses whose payment is done by the employer, including:

  • Maintaining, repairing or decorating the premises.
  • Lighting, heating or cleaning the premises.
  • The provision of furniture (the yearly value is 20% of the cost).

Until and unless the accommodation is declared as one related with the job, the taxation of the full cost of ancillary services should be done. The structural repairs are excluded in this case. However, if the accommodation is related to job, then the taxable ancillary services are restricted to a maximum of the 10% of the net earnings of the employee.

In order to fulfill this purpose, the net earnings are all earnings from the employment (ancillary benefits excluded) minus any allowances for statutory mileage, acceptable expenses, assistances to occupational schemes of pension that are registered (excluding personal plans of pension), and allowances of capital.

Taxation of Employees having Cars

The taxation of the employees who have a car provided by company having ltd formation UK is done on a percentage of the list price of the car which is dependent on the level of the carbon dioxide emissions of the car. The same percentage when multiplied by £21100 determines the benefit, in which case private fuel is also provided. The payment of the authorized mileage allowances can be done free of tax to the employees who make use of their own vehicle for the journeys related with business, only if the process of register a business in UK is completed for that particular business.

A taxable benefit occurs in the case when a car is provided due to the employee’s employment, or to member of his/her family or household for private use. This is not applicable to the excluded employees from the company having ltd formation UK. The private use involves travel from home to work.

  • A charge of tax occurs whether the provision of car is done by the employer or by some other person. The computation of the benefit is done as shown below, even if the car is taken as a substitute to another benefit of a different value.
  • The starting point for the calculation of a car benefit is the list price of the car, plus accessories. The percentage of the list price which is taxable is dependent on the carbon dioxide emissions of the car.
  • The cost of the car is the addition of the items mentioned below:

  • The list price of the car for a single retail sale at the point of very first registration, which involves charges for standard accessories and delivery. The list of the manufacturer, distributor or importer should be used, even if the retailer has made an offer of a discount. The estimation of a notional list is done in case if no list price was published.
  • The cost (fitting inclusive) of all the optional accessories provided at the time when the employee first got the car, not including the equipment and mobile telephones needed by a disabled employee. The extra price of manufacturing or adapting a car to run on road fuel gases is excluded.
  • The cost (fitting inclusive) of all the optional accessories fitted later and equal to a cost of at least £100 each, not including the equipment and mobile phones required by a disabled employee. Such accessories have an effect on the taxable benefit from and including the year of tax in which their fitting is done. However, the accessories that are merely replacing the present accessories and are not superior to the ones replaced are overlooked. The replacement accessories which are superior are considered, but the price of the old accessory is then subtracted.
  • Special rules are applicable in the case of classic cars. If the car is at least 15 years old since the time of first registration at the end of the year of tax, and its market value at the year’s end (or, if earlier, when it stopped being available to the employee) is more than £15000, that market value is utilized instead of the price. The market value takes into consideration all the accessories except the mobile phones and the equipment to be used by the disabled employees.
  • The capital contributions are the payments made by the employee in relation of the cost of the car or accessories. In any year of tax, we take into consideration the capital contributions made that year and the previous years for the same car. The maximum capital contributions to be subtracted is equal to an amount of £5,000; contributions beyond that amount are not considered.
  • In case of the cars which emit carbon dioxide at a rate of 95 g/km, the benefit liable to tax is 11% of the list price of the car. There is an increment in this percentage by 1% for every 5 g/km (rounded down to the nearest multiple of 5) by which the emissions of carbon dioxide become more than 95 g/km up to a maximum of 35%. Therefore, the 11% rates are also applicable to the cars having emissions between 96 g/km and 99 g/km as they are rounded down to 95 g/km. then, for the case of cars having emissions between 100 g/km and 104 g/km, the related percentage will be 11 + ((100 – 95)/5 = 12% etc.
  • In case of the cars with the carbon dioxide emissions between 76 g/km and 94 g/km, the taxable benefit is 10% of the list price of the car. For the cars with carbon dioxide emissions of 75 g/km or less, the benefit liable to tax is 5% of the list price of the car.
  • The cars running on diesel have a supplement of 3% of the list price of the car added to the taxable benefit. However, the maximum percentage 35% of the list price.
  • The reduction of the benefit is done on a time basis where a car is made available first or stops being available during the year of tax or is incapable of being utilized for a continuous period of not less than a period of 30 days (such as the case of it being repaired).
  • The reduction of the benefit is done by any payment the user should make for the private usage of the car (as distinct from a capital contribution to the car’s cost). The payments for the insurance of a car do not count. The benefit cannot go negative in order to create a subtraction from the income of the employee.
  • The pool cars are not included. A car is said to be a pool car in the case if the following conditions are met:

  • It is utilized by more than one employee and is not used ordinarily by any one of them to the others ‘exclusion.
  • Personal use is only incidental to the use for business.
  • Normally, it’s not kept close to the house of an employee.

There exist many ancillary benefits in association with the provision of cars, such as repairs, insurance, vehicle licenses and a parking space near work or at the work place. No extra taxable benefit occurs as a result of these, having the exception of the price of provision of a driver.

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