问答题 Your manager has had a meeting with Benny Fitt, the managing director of Usine Ltd, and has sent you a copy of
the following memorandum.
To The files
From Tax manager
Date 20 December 2011
Subject Usine Ltd
(a) Provision of employment benefits to Benny Fitt (BF)
Petrol company car
Provided on 1 October 2011. Car has list price of ￡28,400 and CO₂ emission figure of 212g/kin. Sun-roof
has been added costing ￡700. BF made a capital contribution of ￡2,500 towards the cost of the car.
Company credit card
During 2011/12 this will be used to pay for:
· motor repairs ￡460
· business accommodation ￡380
· customer entertaining ￡720
· petrol ￡425
Included in the figure for petrol is ￡180 in respect of private mileage which is not reimbursed to Usine Ltd.
Lap top computer
Cost ￡3,000. Provided on 6 April 2011, for private use and occasional business use.
(b) Sales director changes
On 10 December 2011 Usine Ltd dismissed their sales director and paid him a lump sum redundancy
payment of ￡45,000. This consisted of the following.
￡
Statutory redundancy pay 2,100
Payment in lieu of notice 3,100
Holiday pay 2,800
Ex gratia compensation for loss of office 34,000
Agreement not to work for a rival company 3,000
45,000
A new sales director is to commence employment on 1 January 2012. She is to be paid a lump sum
payment of ￡10,000 upon the commencement of employment. The new director currently lives 120 miles
from Usine Ltd's head office, so the company has offered her two alternative arrangements.
(i) Usine Ltd will pay ￡9,500 towards the cost of the director's relocation, and will also provide an
interest free loan of ￡50,000 in order for the director to purchase a property.
(ii) Usine Ltd will provide accommodation for the director. The company owns a house which has an
annual value of ￡4,400, is currently valued at ￡99,000, and has recently been furnished at a cost of
￡10,400. Usine Ltd will pay for the annual running costs of ￡3,200.
(c) Company Share Option Plan
The company is considering setting up a Company Share Option Plan for certain senior employees and
directors.
Options will be granted to these individuals that will be exercisable between three and ten years after the
grant.
An extract from an email from your manager is set out below.
Please prepare a letter to Benny Fitt setting out the following:
1 Employment benefits
Advise both Benny Fitt and Usine Ltd of the tax implications arising from the provision of the company car,
the credit card and the laptop computer.
Explain why it would be beneficial if Benny paid Usine Ltd ￡180 for his private petrol.
You can ignore the VAT implications.
Sales director changes
Explain the income tax implications of the lump sum payments of ￡45,000 and ￡10,000.
Explain the income tax implications of the two alternative arrangements offered to the new sales director.
You do not need to consider the tax implications for Usine Ltd and you should confine your statements to
the implications for 2011/12.
Share option scheme
Outline the conditions required for the scheme to obtain HMRC approval.
You have extracted the following further information from client files.
· Usine Ltd is an unquoted trading company.
· Benny Fitt is aged 39 and is paid a salary of ￡45,000 per annum.
· Usine Ltd purchased the house available to the new sales director in 1998 for ￡86,000. It was improved at a
cost of ￡8,000 during 2007.
Required
Prepare the letter requested by your manager.
Marks are available for the components of the letter as follows:
1 Tax treatment of the employment benefits for Benny Fitt and Usine Ltd.
2 Tax implications of the payments (and benefits) provided to the two sales directors.
3 The conditions for the share option scheme to be approved.
Appropriateness of the format and presentation of the letter and the effectiveness with which its content is
communicated.
You may assume that the rates and allowances for the 2011/12 tax year and Financial Year 2011 continue to apply
for the foreseeable future.