You are acting as tax adviser to Mills Ltd, which has a year end 31st March, and have been asked, by the Personnel Manager, to write a report relating to the benefits package offered to certain grades of staff. In particular he requires information on the following items.
1. The Personnel Manager is reviewing the company’s position regarding the provision of company cars and needs to know the general changes that are proposed to the taxation of company cars, both for the company and for the employees, for the next few tax years.
2. From 6th April 2012, certain mangers are to be offered a petrol driven 5 door hatchback, with CO2 emissions of 139g/km. The list price of the car is £18,000, including VAT, but the company has negotiated a 15% discount off this list price.
The company will pay for car tax of £120, insurance and servicing of the cars.
The insurance for each car, on the company’s group insurance policy, will be £400, and the other running costs (excluding fuel for business mileage) are estimated to be £300 per year.
In addition, a manager can opt for a £500 annual reduction in their salary, and in return receive petrol for private motoring.
You have been asked to calculate the total cost to the company of purchasing and running one of these cars (excluding petrol), and the Capital Allowances available for the year ending 31st March 2013. In addition, you are required to calculate the benefit in kind for each manager, and hence the cost of the car to a manager whose marginal rate of income tax is 40%. Also, set out the facts that each manager needs to take into account when deciding whether to accept the petrol for private motoring.
1.3 The Marketing Director’s son (aged 18) has recently passed his driving test, and he is keen to provide the son with a car. An acquaintance has told him that it would be cheaper for the company to provide the car, especially if it were a low-emission car. The Director has identified such a car, and it has list price of £9,600, including VAT. It has CO2 emissions of 99g/km, and it is petrol driven.
The cost to add the son to the group insurance policy would be £500, the servicing costs are estimated at £300, and the car tax would be £0.
The Managing Director’s marginal rate of tax is 50%, and there is no discount available to the company for purchasing this car.
The Personnel Manager has asked you to explain why it may be cheaper for the company (rather than the Director to provide a car privately) to provide a car for the son, and if the company does so provide the car, to investigate the costs (both for the company and the Managing Director) and Capital Allowances available for providing the car for his son.
The company has 2 vans of less than 3,500kg. The drivers commute from home to work in these vans each day, as they are allowed to keep them overnight at home. All fuel for the vans is paid for by the company. The drivers have both signed a declaration to state that they do not use the vans for private use apart from driving to and from work. However, one of the drivers has asked if he can use the van to move house, and it has been discovered that the other driver regularly uses “his” van to take items to the dump at weekends.
You have been asked to explain the consequences of this private usage. No benefit in kind has been assessed on these drivers at present.
3. Provision of Staff Lunches.
There is a cafeteria available for staff, with a separate dining area for directors and senior staff. Meals have been provided for many years to all staff at cost price, but the company is now investigating offering the meals in the senior dining room (only available to senior managers and directors) free of charge.
Explain the tax consequences of this course of action.
This assignment is subject to ratification by the external examiner
Assignment guidance notes
The report should be between 1,300 and 1,800 words in total. You are required to reference this Report as if it were an academic article by using the Harvard method. Your sources must be correctly referenced, and if you use a direct quote (ie copying sentences or paragraphs from existing material) these must be placed in quotation marks.
Failure to reference is plagiarism and subject to the sanctions set out in the University’s policy on plagiarism.
Reports must be word-processed.
In addition, an electronic copy must be submitted via Blackboard for plagiarism checking. Paper copies will not be marked unless an electronic copy is also submitted by the due date and time. Please note that the University’s software checks against published sources as well as other assignments, submitted both to this University and to other Education Establishments.
You will be able to submit draft copies of your assignment from 2 weeks before the due date and view the “originality report” which will indicate the similarity your assignment has with other sources.
If the report indicates that your draft is not sufficiently original you will have the opportunity to re-draft it and view the revised report. You can do this as often as you like up to the due date. You will not, however, be able to submit through Blackboard after the due date. You must in any case submit your paper copy to TC375 no later than the due date. The paper copy that you submit to TC375 must be identical to your final version submitted electronically.
If you submit via Blackboard at the last minute, and your originality report indicates a high degree of similarity with other sources, you will have no opportunity to revise it and must therefore submit a paper version as it is. Obtaining a last minute originality report which indicates your assignment may be too similar to other sources will not be accepted as a reason for an extension or late submission. Where an electronic draft has been submitted on or shortly before the due date and no final paper version has been submitted on time the last electronic version may be taken as your final submission and where appropriate put through the University’s plagiarism procedures.
If, exceptionally, you have agreed an extension in advance for valid medical or other reasons and are submitting after the due date you must submit through TC375 and also ensure that an identical electronic copy reaches the module leader, Josie Adams.
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