Prepare a note that discusses the taxation of various benefits provided to the employees when their employment contract is terminated.

Advanced personal taxation

Details of other income

From the information Billy provides, you establish that he had the following other income for 2018/19:
Bank interest received of £75 from Halifax savings account;
NS&I bank interest received of £27;
Employment income (Billy is an occasional employee of an outdoor catering
company) of £11,690. From this, PAYE of £38 has been deducted; and
Dividend receipts of £6,200.

Required:

Calculate Billy’s income tax liability for 2018/19 and state what amount remains due/will be repaid.

Instructions:

1. Remember this question relates to previous tax years so you will need to research the relevant tax and other rates in those tax years.
2. To solve this question, you will need to calculate the following;
Trading income for period to 31 December 2018 and year to 31 December 2019
Capital allowances for year to 31 December 2018 and year to 31 December 2019 using relevant rates
Income tax including business income, employment income and income from other sources.
You will also need to provide explanatory notes to explain your adjustments to trading profits.

SECTION B
PART 1 – Impact of taxes and tax planning – Finance Act 2020

A partner of your accountancy firm has requested you to prepare detailed notes on the impact of redundancy pay. During this brief meeting with you, the partner said the following, “When the employment of an employee ends prematurely (i.e. before reaching the retirement age or by resignation of the employee), it is called termination of the employment. Ordinarily this type of termination is initiated by the employer, therefore, breaching the employment contract between themselves and the employee. As a result, employers usually offer the employee some benefits at the time of termination to settle the breach of employment contract.”

The partner required you prepare a note that discusses the taxation of various benefits provided to the employees when their employment contract is terminated. Specifically, the following benefits must be separately discussed among any other benefits that you may come across in your research.

• Gardening leave
• Payment in lieu of notice (PILON) • Redundancy pay

The discussion should also include how to determine whether benefits are being paid as ‘services rendered under employment’ or ‘as compensation for breach of the employment contract’.

References to the relevant sections of the legislation (section 62 & sections 401- 416 ITEPA 2003) will enable you to secure higher marks.

REQUIRED:

Present your detailed notes in a report format. (Calculations are not required for this question)
Your summary should be detailed enough to be a basis for the partner to explain the matter to his clients. It may contain examples if that will improve the clarity of your report.
(20 marks – maximum 750 words)

PART 2 – The importance of overseas workday relief – Finance Act 2020

Overseas workday relief is a special relief provided to individuals working in the UK with
some days working overseas.
The manager of your accounting firm has asked you to prepare a detailed report on the conditions required to be met in order to qualify for overseas workday relief.
REQUIRED:
Write a report as requested by the Manager. (Calculations are not required for this part of the question).
Your report should address the following issues:
What is overseas workday relief?
What conditions need to be met to claim overseas workday relief?
What planning an employee who wishes to claim overseas workday relief in the future
should do when starting a work assignment, which allows him to claim overseas workday relief?
(20 marks – 750 words)
Presentation (10 marks)
Bibliography and referenced citations in text and cross referencing 5 marks. General presentation and English 5 marks.

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