**EXAMPLE 11**

During the tax year 2013–14 Fashionable plc provided the following employees with company motor cars:

Amanda was provided with a new petrol powered company car throughout the tax year 2013–14. The motor car has a list price of £12,200 and an official CO₂ emission rate of 84 grams per kilometre.

Betty was provided with a new petrol powered company car throughout the tax year 2013–14. The motor car has a list price of £16,400 and an official CO₂ emission rate of 109 grams per kilometre.

Charles was provided with a new diesel powered company car on 6 August 2013. The motor car has a list price of £13,500 and an official CO₂ emission rate of 137 grams per kilometre.

Diana was provided with a new petrol powered company car throughout the tax year 2013–14. The motor car has a list price of £84,600 and an official CO₂ emission rate of 233 grams per kilometre. Diana paid Fashionable plc £1,200 during the tax year 2013–14 for the use of the motor car.

**Amanda**

The CO₂ emissions are between 76 grams and 94 grams per kilometre so the relevant percentage is 10%. The motor car was available throughout 2013–14, so the benefit is £1,220 (12,200 x 10%).

**Betty**

The CO₂ emissions are above the base level figure of 95 grams per kilometre. The CO₂ emissions figure of 109 is rounded down to 105 so that it is divisible by five. The minimum percentage of 11% is increased in 1% steps for each five grams per kilometre above the base level, so the relevant percentage is 13% (11% + 2% (105 – 95 = 10/5)). The motor car was available throughout 2013–14 so the benefit is £2,132 (16,400 x 13%).

**Charles**

The CO₂ emissions are above the base level figure of 95 grams per kilometre. The relevant percentage is 22% (11% + 8% (135 – 95 = 40/5) = 19% plus a 3% charge for a diesel car). The motor car was only available for eight months of 2013–14, so the benefit is £1,980 (13,500 x 22% x 8/12).

**Diana**

The CO₂ emissions are above the base level figure of 95 grams per kilometre. The relevant percentage is 38% (11% + 27% (230 – 95 = 135/5)), but this is restricted to the maximum of 35%. The motor car was available throughout 2013–14 so the benefit is £28,410 (84,600 x 35% = 29,610 – 1,200). The contribution by Diana towards the use of the motor car reduces the benefit.

**Company car fuel benefit**

The fuel benefit is calculated as a percentage of a base figure that is announced each year. For the tax year 2013–14 the base figure has been increased from £20,200 to £21,100.

The percentage used in the calculation is exactly the same as that used for calculating the related company car benefit.

EXAMPLE 12

Continuing with **example 11**.

Amanda was provided with fuel for private use between 6 April 2013 and 5 April 2014.

Betty was provided with fuel for private use between 6 April 2013 and 31 December 2013.

Charles was provided with fuel for private use between 6 August 2013 and 5 April 2014.

Diana was provided with fuel for private use between 6 April 2013 and 5 April 2014. She paid Fashionable plc £600 during the tax year 2013–14 towards the cost of private fuel, although the actual cost of this fuel was £1,000.

**Amanda**

The motor car was available throughout 2013–14 so the benefit is £2,110 (21,100 x 10%).

**Betty**

Fuel was only available for nine months of 2013–14, so the fuel benefit is £2,057 (21,100 x 13% x 9/12).

**Charles**

The motor car was only available for eight months of 2013–14, so the fuel benefit is £3,095 (21,100 x 22% x 8/12).

**Diana**

The motor car was available throughout 2013–14 so the benefit is £7,385 (21,100 x 35%). There is no reduction for the contributions made since the cost of private fuel was not fully reimbursed.

**Company van fuel benefit**

The fuel benefit where private fuel is provided for a company van has been increased from £550 to £564.

**Childcare**

The exemption limit where childcare is provided by an employer has been adjusted for additional rate taxpayers. This is in line with the reduction of the additional rate of income tax from 50% to 45%.

The weekly limits are now £55 per week for basic rate taxpayers, £28 per week for higher rate taxpayers, and £25 per week for additional rate taxpayers. These limits mean that all taxpayers receive exactly the same amount of tax relief from the childcare exemption.

**Official rate of interest**

The official rate of interest is used when calculating the taxable benefit arising from a beneficial loan or from the provision of living accommodation costing in excess of £75,000.

For the June and December 2014 sittings the actual official rate of interest of 4.0% for the tax year 2013–14 will be used.

**Luncheon vouchers**

The exemption for the first 15p per day for luncheon vouchers has been abolished. Therefore the full cost of luncheon vouchers provided to employees is now a taxable benefit.

**Cycle to work days**

The exemption where meals or refreshments were provided to employees as part of a cycle to work day has been abolished.

**PAYE – Real time reporting**

The PAYE system has been modernised by the introduction of real time reporting. The fundamentals of PAYE itself are unchanged, so employees are still issued with tax codes, and the employer is still responsible for deducting tax and national insurance contributions (NIC). The due dates for paying income tax and NIC to HM Revenue and Customs remain unchanged. However, with real time reporting, employers send income tax and NIC information to HM Revenue and Customs electronically every time employees are paid (either weekly or monthly) rather than waiting until after the end of the tax year as was previously the case.

Forms P35 and P14 are no longer required, since end of year information is included with the final real time submission for the tax year. However, form P60 must still be provided to employees following the end of the tax year. Form P45 has also been retained, and this is provided to a leaving employee.

Employers are charged a penalty if their final real time submission for a tax year is made late. The deadline is 19 May following the end of the tax year, and the penalty that can be imposed is £100 per month per 50 employees. For the tax year 2013–14 there are no penalties if submissions made during the tax year are late.

Since information must be filed electronically, it is no longer possible to produce a payroll manually. Employers must either run payroll software or use the services of a payroll provider.

Capital allowances

**Motor cars**

The motor car CO₂ emission thresholds have been reduced:

- The CO₂ emissions limit to qualify for a 100% first-year allowance has been reduced from 110 grams per kilometre to 95 grams per kilometre.
- The CO₂ emissions limit to qualify for writing-down allowances at the rate of 18% has been reduced from 160 grams per kilometre to 130 grams per kilometre.

This means that writing-down allowances at the rate of 18% are available where a motor car’s CO₂ emissions are between 96 and 130 grams per kilometre, and at the rate of 8% where CO₂ emissions are over 130 grams per kilometre.

These changes apply from 6 April 2013 (1 April 2013 for limited companies), and a question **will not be set** involving the CO₂ emission thresholds that applied prior to this date.

**Annual investment allowance**

From 1 January 2013 the annual investment allowance (AIA) limit has been increased from £25,000 to £250,000. The AIA provides an allowance of 100% for the first £250,000 of expenditure on plant and machinery in a 12-month period. Any expenditure in excess of the £250,000 limit qualifies for writing-down allowances as normal. The AIA applies to all expenditure on plant and machinery with the exception of motor cars. The £250,000 limit is proportionally reduced or increased where a period of account is shorter or longer than 12 months. For example, the AIA would be £187,500 (250,000 x 9/12) for a nine-month period of account.

Where a period of account spans 1 January 2013, then apportionment will be necessary in order to determine the amount of AIA. A question **will not be set** involving apportionment as regards the amount of AIA. However, there is no reason why a question could not involve a 31 December 2013 year end.

The capital allowances information that will be given in the tax rates and allowances section of the examination paper for the June and December 2014 sittings is as follows:

Rates of allowance