ACCA TX ^UK Syllabus B. Income Tax And Nic Liabilities - PAYE system - Past Papers ^{6 / 12}

You should assume that today’s date is 1 March 2014.
George, a software developer, was born on 11 June 1986. He has accepted a one-year contract to update software for Xpee plc.

(1) The contract will run from 6 April 2014 to 5 April 2015, with a fee of £40,000 payable for the entire year of the contract. A condition of the contract is that George will have to do the work personally and not be permitted to sub-contract the work to anyone else.

(2) George will work from home, but will have to attend weekly meetings at Xpee plc’s offices to receive instructions regarding the work to be performed during the following week.

(3) George will not incur any significant expenses in respect of the contract apart from the purchase of a new laptop computer for £3,600 on 6 April 2014. This laptop will be used 100% for business purposes.

(4) During the term of the contract, George will not be permitted to work for any other clients. He will therefore not have any other income during the tax year 2014–15.

(5) George’s tax liability for the tax year 2013–14 was collected through PAYE, so he will not be required to make any payments on account in respect of the tax year 2014–15.

George has several friends who are also software developers. He understands that his employment status is not clear cut but that his income tax liability for the tax year 2014–15 will be the same regardless of whether he is treated as employed or as self-employed. However, George appreciates that there are advantages to being classed as self-employed.

Required:
(c) If George is treated as being an employee of Xpee plc instead of self-employed:

(i) Explain why his income tax liability will be payable earlier. (2 marks)

Wai was born on 14 June 1960. She is employed as a sales manager by Qaz plc, and the following information is available in respect of the tax year 2014–15:

(1) During the tax year 2014–15, Wai was paid a gross monthly salary of £10,200.
(2) In addition to her salary, Wai has been paid the following bonuses:

(4) During the period 1 September 2014 to 5 April 2015, Qaz plc provided Wai with a petrol powered motor car which has a list price of £15,800, and an official CO2 emission rate of 86 grams per kilometre. Qaz plc does not provide Wai with any fuel for private journeys.

(5) During January 2015, Wai spent ten nights overseas on company business. Qaz plc paid Wai a daily allowance of £10 to cover the cost of personal incidental expenses, such as telephone calls to her family.

(6) Throughout the tax year 2014–15, Qaz plc allowed Wai the use of two mobile telephones. The telephones had each cost £400 when purchased by the company in March 2014.

(7) Throughout the tax year 2014–15, Qaz plc provided Wai with living accommodation. The company had purchased the property on 1 June 2011 for £142,000, and it has been provided to Wai since 1 February 2013.

Improvements costing £14,400 were made to the property during October 2011, and further improvements costing £9,800 were made during August 2013. The annual value of the property is £4,600.

Required:
(b) Briefly outline the information to be included in PAYE forms P60 and P11D, and state the dates by which they should have been provided to Wai for the tax year 2014–15.

Note: Your answer should be confined to the details which are relevant to Wai, although no figures are required. (3 marks)

Road Ltd’s recently appointed bookkeeper understands that the company must report PAYE information to HM Revenue and Customs in real time. However, the bookkeeper does not know how PAYE real time reporting works in practice, having previously only produced payroll manually.

Road Ltd pays its employees at the end of each calendar month, with some employees receiving taxable benefits.

Required:  
State what forms, if any, will have to be provided to employees or submitted to HM Revenue and Customs following the end of the tax year.