Question:

TDW Ltd

TDW Ltd runs a health club. The company has three employees who received benefits during 2019/20, and it therefore needs to prepare forms P11D for them. Each of the three employees is paid an annual salary of £65,000.

The following information is relevant:

Andrea Lean

1)Andrea was employed by TDW Ltd throughout 2019/20.

2)Throughout 2019/20 TDW Ltd provided Andrea with a 2200 cc petrol powered company motor car with a list price of £19,400. The official CO₂ emission rate for the motor car is 270 grams per kilometer. TDW Ltd paid for all of the motor car’s running costs of £6,200 during 2019/20, including petrol used for private journeys. Andrea pays £150 per month to TDW Ltd for the use of the motor car.

3)TDW Ltd has provide Andrea with living accommodation since 1 November 2018. The property was purchased on 1 January 2016 for £130,000. The company spent £14,000 improving the property during March 2017, and a further £8,000 was spent on improvements during May 2019.

The value of the property on 1 November 2018 was £170,000, and it has a rateable value of £7,000. The furniture in the property cost £6,000 during November 2018. Andrea personally pays for the annual running costs of the property amounting to £4,000.

4)Throughout 2019/20 TDW Ltd provided Andrea with a mobile telephone costing £500. The company paid for all business and private telephone calls.

Ben Slim

1)Ben commenced employment with TDW Ltd on 1 July 2019.

2)On 1 July 2019 TDW Ltd provided Ben with an interest free loan of £120,000 so that he could purchase a new main residence. He repaid £20,000 of the loan on 1 October 2019.

3)During 2019/20 TDW Ltd paid £9,300 towards the cost of Ben’s relocation. His previous main residence was 125 miles from his place of employment with the company. The £9,200 covered the cost of disposing of Ben’s old property and of acquiring his new property.

4)From 1 July 2019 TDW Ltd provided Ben with a petrol powered second hand motor car which has a list price of £9,200. The official CO₂ emission rate for the motor car is 112 g/km. no fuel was provided by the company; Ben just claimed fuel for his business mileage. Ben had the use of the car until 30 September 2019 when his new company car arrived.

5)During the period from 1 October 2019 until 5 April 2020 TDW Ltd provided Ben with a new diesel-powered company motor car which has a list price of £11,200. The official CO₂ emission rate for the motor car is 134 g/km. Ben reimburses TDW Ltd for the fuel used for private journeys.

Chai Trim

1)Chai was employed by TDW Ltd throughout 2019/20.

2)During 2019/20 TDW Ltd provided Chai with a two-year old company van, which was available for private use. The van was unavailable during the period 1 August to 30 September 2019. Chai was also provided with private fuel for the van.

3)TDW Ltd has provided Chai with a television for her personal use since 6 April 2017. The television cost TDW Ltd £800 in April 2017. On 6 April 2019 the company sold the television to Chai for £150, although its market value on that date was £250.

4)Throughout 2019/20 TDW Ltd provided Chai with free membership of its health club. The normal annual cost of membership is £800. This figure is made up of direct costs of £150, fixed overhead costs of £400 and a profit of £250. The budgeted membership for the year has been exceeded, but the health club has surplus capacity.

5)On 1 January 2020 TDW Ltd provided Chai with a new computer costing £1,900. She uses the computer at home for personal study purposes.

Required:

a) Explain what is meant by the term ‘P11D employee’.

b) Calculate the benefit figures that TDW Ltd will have to include on the forms P11D for Andrea, Ben, and Chai for 2019/20.

c) Explain how the income tax liability in respect of benefits is collected by HM Revenue & Customs.