EXAMPLE 14
During the tax year 2020-21, Fashionable plc provided the following employees with company motor cars:
Amanda was provided with a hybrid-electric company car throughout the tax year 2020-21. The motor car has a list price of £32,200, an official CO2 emission rate of 24 grams per kilometre and an electric range of 90 miles.
Betty was provided with a new diesel powered company car throughout the tax year 2020-21. The motor car has a list price of £16,400 and an official CO2 emission rate of 109 grams per kilometre. The motor car meets the RDE2 standard.
Charles was provided with a new diesel powered company car on 6 August 2020. The motor car has a list price of £13,500 and an official CO2 emission rate of 112 grams per kilometre. The motor car does not meet the RDE2 standard.
Diana was provided with a new petrol powered company car throughout the tax year 2020-21. The motor car has a list price of £84,600 and an official CO2 emission rate of 188 grams per kilometre. Diana paid Fashionable plc £1,200 during the tax year 2020-21 for the use of the motor car.
Amanda
With CO2 emissions between 1 and 50 grams per kilometre, the electric range of the motor car is relevant. This is between 70 and 129 miles, so the relevant percentage is 3%. The motor car was available throughout 2020-21, so the benefit is £966 (32,200 x 3%).
Betty
The CO2 emissions are above the base level figure of 55 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 14% is increased in 1% steps for each five grams per kilometre above the base level, so the relevant percentage is 24% (14% + 10% ((105 – 55)/5)). The 4% surcharge for diesel cars is not applied because the RDE2 standard is met. The motor car was available throughout 2020-21, so the benefit is £3,936 (16,400 x 24%).
Charles
The CO2 emissions are above the base level figure of 55 grams per kilometre. The relevant percentage is 29% (14% + 11% ((110 – 55)/5) + 4% (charge for a diesel car not meeting the RDE2 standard)). The motor car was only available for eight months of 2020-21, so the benefit is £2,610 (13,500 x 29% x 8/12).
Diana
The CO2 emissions are above the base level figure of 55 grams per kilometre. The relevant percentage is 40% (14% + 26% ((185 – 55)/5)), but this is restricted to the maximum of 37%. The motor car was available throughout 2020-21, so the benefit is £30,102 ((84,600 x 37%) – 1,200). The contribution by Diana towards the use of the motor car reduces the benefit.
Company van benefit
The annual scale charge used to calculate the benefit where an employee is provided with a company van has been increased from £3,430 to £3,490.
Company car fuel benefit
The fuel benefit is calculated as a percentage of a base figure which is announced each year. For the tax year 2020-21, the base figure has been increased from £24,100 to £24,500.
The percentage used in the calculation is exactly the same as that used for calculating the related company car benefit.
EXAMPLE 15
Continuing with example 14.
Amanda was provided with fuel for private use between 6 April 2020 and 5 April 2021.
Betty was provided with fuel for private use between 6 April 2020 and 31 December 2020.
Charles was provided with fuel for private use between 6 August 2020 and 5 April 2021.
Diana was provided with fuel for private use between 6 April 2020 and 5 April 2021. She paid Fashionable plc £600 during the tax year 2020-21 towards the cost of private fuel, although the actual cost of this fuel was £1,000.
Amanda
Amanda was provided with fuel for private use throughout 2020-21, so the benefit is £735 (24,500 x 3%).
Betty
Betty was provided with fuel for private use for nine months of 2020-21, so the benefit is £4,410 (24,500 x 24% x 9/12).
Charles
Charles was provided with fuel for private use for eight months of 2020-21, so the benefit is £4,737 (24,500 x 29% x 8/12).
Diana
Diana was provided with fuel for private use throughout 2020-21, so the benefit is £9,065 (24,500 x 37%). There is no reduction for the contribution made by Diana because 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 £655 to £666.
Approved mileage allowances
Approved mileage allowances were previously known as authorised mileage allowances. The rates themselves are unchanged, with a rate of 45p per mile for the first 10,000 business miles, and 25p per mile for business mileage in excess of 10,000 miles.
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 exams in the period 1 June 2021 to 31 March 2022, the actual official rate of interest of 2.25% for the tax year 2020-21 will be used.
Capital allowances
Annual investment allowance
The current annual investment allowance (AIA) limit of £1,000,000 will expire on 31 December 2020 and be replaced by a rate of £200,000 from 1 January 2021. However, for exams in the period 1 June 2021 to 31 March 2022, it will be assumed that the limit of £1,000,000 continues to apply. This will be the case regardless of the period covered by an exam question, so, for example, the AIA limit for the year ended 31 March 2021 will be £1,000,000.
The AIA provides an allowance of 100% for the first £1,000,000 of expenditure on plant and machinery in a 12 month period. Any expenditure in excess of the £1,000,000 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 £1,000,000 limit is proportionally reduced or increased where a period of account is shorter or longer than 12 months. For example, for the three-month period ended 31 December 2020, the AIA limit would be £250,000 (1,000,000 x 3/12).
EXAMPLE 16
Ling prepares accounts to 31 March. On 1 April 2020, the tax written down value of plant and machinery in her main pool was £16,700.
The following transactions took place during the year ended 31 March 2021: