LI Taxation: Principles and Planning (33179)

Week 3: Taxing Income from Employment and

Pensions

Extension Question Solutions

Question 1
Molly is provided with the following assets for private use:
Asset First provided Cost Contribution by
employee
Van (no fuel) 23 May 2020 £15,000 £100 per month
Machinery 5 June 2015 £1,000 £15 per month
Computer 30 Sept 2020 £1,750 None
Television 1 June 2022 £900 None

Calculate the taxable benefit for the private use of the above assets for
the tax year 2022/23, assuming the van has CO2 emissions of 163g/km
and the private use of the computer is insignificant.
Molly £
Van 3,600
Less: employee contribution (12 × £100) (1,200)
–––––
Taxable benefit 2,400
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Machinery £
Annual value (20% × £1,000) 200
Less: employee contribution (12 × £15) (180)
––––
Taxable benefit 20
––––
Computer
Insignificant private use therefore no taxable benefit 0
––––
Television
Annual value (20% × £900) 180
––––
Available for 10 months of the tax year (£180 × 10/12)
Taxable benefit 150
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Question 2
Adam’s employer bought a house in May 2014 for £140,000. The house was
made available to Adam in April 2021 when its market value was £230,000.
£40,000 was spent on improvements in June 2021, and in May 2022 Adam’s
employer spent £60,000 on an extension to the house. The house has an
annual value of £6,000 per annum.
What is Adam’s taxable benefit for the tax year 2022/23?
Adam
£
Basic charge = Annual value 6,000
Expensive accommodation benefit:
(£230,000 + £40,000 – £75,000) × 2% 3,900
––––––
Total taxable benefit 9,900
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Note: Since Adam’s employer bought the house more than 6 years before Adam
moved in, the cost of the house is replaced by its market value as at April 2021 when
Adam moved in.
Cost of providing the property is equal to the purchase price plus improvement costs
before start of tax year minus capital contributions from employee
The cost of the improvements in June 2021 are included because they were incurred
prior to the start of the 2022/23 tax year (i.e., before 6 April 2022). However, the
extension in May 2022 will not be included until the following year.

Question 3 solution is on the next page

Question 3
The following individuals have occupational pension schemes into which
contributions were made during the tax year 2022/23 as follows:
Individual’s Employer’s Net income
gross contributions
contributions
£ £ £
Aadarsh 11,000 18,000 190,000
Bryn 0 30,000 225,000
Chakor 12,000 20,000 250,000
Damian 20,000 28,000 275,000
Calculate the annual allowance for the tax year 2022/23 for each individual
assuming they have no unused allowances brought forward.
Annual allowance for high earners
Adjusted income
Aadarsh Bryn Chakor Damian
£ £ £
Net income 190,000 225,000 250,000 275,000
Employee OPCs 11,000 0 12,000 20,000
Employer’s cont 18,000 30,000 20,000 28,000
–––––– –––––– –––––– ––––––
Adjusted income 219,000 255,000 282,000 323,000
–––––– –––––– –––––– ––––––
Aadarsh
Aadarsh’s adjusted income is < £240,000 and therefore he will be entitled to the full
AA of £40,000 in the tax year 2021/22.
Bryn
Bryn’s adjusted income is > £240,000 so his AA is restricted as follows:
£
Adjusted income 255,000
Less: Threshold (240,000)
––––––
Excess over threshold 15,000
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Excess × 50% 7,500
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Available allowance (£40,000 – £7,500) 32,500
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Chakor
Chakor’s adjusted income is > £240,000 so his AA is restricted as follows:
£
Adjusted income 282,000
Less: Threshold (240,000)
––––––
Excess over threshold 42,000
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Excess × 50% 21,000
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Available allowance (£40,000 – £21,000) 19,000
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Damian
Damian’s adjusted income is > £312,000 and therefore the AA is restricted to the
minimum amount of £4,000.