ATX

Question 1

Employment income is subject to

Answer 1

Income tax, Class I NIC (Employee), Class I NIC (Employer), Class I-A NIC (Employer)

Question 2

Termination payment means

Answer 2

Amount paid at the termination of job

Question 3

Termination payments are divided into 3 heads

Answer 3

1. Wholly exempt
2. Wholly chargeable
3. Partially chargeable

Question 4

Wholly exempt

Answer 4

Payments which are not subject to NIC and income tax.
Paid under legal obligation by employer (statuotry redundancy payment, statutory disability payment)

Question 5

Wholly chargeable

Answer 5

Cash paid to employee at the time of termination. Contractual obligation
e.g notice period amount, payment made under any contract between employee n employer)
Income tax, NIC Class I employee and employer both charged

Question 6

Partially exempt payments

Answer 6

On these payments and benefits exemption is available uptil 30,000 GBP. However this limit is reduced if any wholly exempt amount are also paid to employee. On excess amount, Income tax and class I-A employer NIC is payable.

Question 7

Partial payment includes

Answer 7

Ex-gratia payments: amount without any legal or contractual obligation
Non cash benefits given at termination
Car given for use uptil certain period after termination
Continued use of employer accommodation for certain period after termination

Question 8

If insufficient notice is paid to employee and no amount paid for it, however some exgratia amount is paid, then exgratia includes compensation for insufficient notice

Answer 8

It is determined by annual salary / 12 x months

Question 9

Share based payment includes

Answer 9

Employee provide shares as part of remuneation to employees

Question 10

Share incentive/ transfer of shares include

Answer 10

immediate giving of shares

Question 11

Share options

Answer 11

Promise to pay shares at some future date

Question 12

When shares are transferred, employment benefit will be assesed by

Answer 12

Mv of shares xxx
less amount paid -xxx

Question 13

On this benefit what will be payable

Answer 13

Income tax and NIC both

Question 14

NIC CLASS I EMP
NIC CLASS I ER is paid on?

Answer 14

Shares are of quoted company

Question 15

NIC class IA ER is paid on?

Answer 15

Unquoted shares

Question 16

When shares are disposed then cgt will arise on it:

Answer 16

DP xxx
MV of shares trnsf -xxx
Gain/ loss xxx/-xxx

Question 17

Share options

Answer 17

In this agreement, shares to be given to employee at a future date

Question 18

In share options three dates are important

Answer 18

1) Grant date: at which the share option agreement was done between employer and employee
2)Exercise date: at which employee get actual shares
3) disposal date: date at which employee sell/disposes those shares

Question 19

From tax perspective, Share option agreements are divided in two categories:

Answer 19

1) Approved share option plans
2) Unapproved share option plan

Question 20

If share option plan is from one of the approved share option plans then its taxation will be only assessed on disposal proceeds

Answer 20

DP xxx
less:cost -xxx

Question 21

If share option plan is not from approved plan then it is

Answer 21

unapproved option plan

Question 22

Unapproved option plan will be taxed as:

Answer 22

Grant date: no tax will be assessd
exercise date: employment benefit will be assessd

MV of shares on exercise date xxx
less: amount paid by employee - xxx
you will get employment benefit xxx
Income tax and NIC will be assesd (NIC will be quoted and unquoted same rule)

Question 23

Unapproved plan if disposed:

Answer 23

Disposal proceed xxx
less: mv of shares at transferred date -xxx
Gain/loss xxx
It is taxed under CGT

Question 24

Approved share option plans include

Answer 24

1. Company share option plan (CSOP)
2. Enterprise Management Incentive Plan (EMIP)
3. Save as you earn plan (SAYE)
4. Share Incentive Plan (SIP)

Question 25

CSOP is provided at the discretion of

Answer 25

Employer. and not to be offered to all employees

Question 26

CSOP to whom to offer must fulfil the following conditions:

Answer 26

1. If he is a director then he must be a full time employee 2. If not director then, full time and part time employee 3. that employee does not hold 30% or more shareholding in the company

Question 27

CSOP characteristics:

Answer 27

1. Exercise period should be 3 years to 10 years 2. Ex price should be equal to the mv at the grant date 3. Max value of the shares granted should be 60,000 on mv on grant date 4. As it is approved plan so employer can claim an allowed expense of this claim in his trading pnl

Question 28

EMI to whom conditions should fulfil:

Answer 28

1. Full time workers of the company and own less than 30% shares

Question 29

EMIP Characteristics

Answer 29

1. exercise period shud be 0 to 10 yrs 2. Maximum value of plan is shares worth 250,000 valued at mv on grant date. however if csop is also granted then this value shud be reduced by that amount. 3. Ex price should be equal to mv at grant date however if it is provided on reduced price then that benefit is taxed at exercise date

Question 30

Save as you earn plan

Answer 30

- Not a flexible plan as employer has to offer it to all employees if this plan is launched - Employer can keep a condition of continuos employment uptil 5 years (not necessary but can be)

Question 31

In this plan employees make a saving contribution uptil

Answer 31

500 GBP per month

Question 32

Employer can pay

Answer 32

A tax free interest income to employees on the saving

Question 33

This plan can continue for

Answer 33

3 years or 5 years

Question 34

At the maturity of plan, employee have the option to

Answer 34

Withdraw cash or to use the fund to exercise share option

Question 35

Share options can be exercised at

Answer 35

At exercise price which can be between 80% - 100% of mv on grant date

Question 36

As this share option plan is approved plan therefore

Answer 36

employer can claim it as an allowed expense from trading pnl