Your accountancy practice has been approached by Camilla Jones to advise her on her tax position for the year ended 5 April 2022 (2021/22). She has provided the following details of her income and benefits. She would also like you to advise her parents

Camilla was head hunted to join a research organisation on 6th August 2021.

Her remuneration package was as follows:

Salary: 6,500 per month since joining the company. She pays 7% of her salary into the company pension scheme. Her employer also contributes 5% of her salary into the pension scheme.

Camilla was rewarded for her hard work and she got a one off bonus of 25,000 in December 2021.

Living accommodation: She is provided with the use of the company flat, for which the company paid 950,000 in 2017. The flat has an annual value of 7,000.

In June 2019 improvements were made to the flat costing 28,000.

The running cost to the company is 16,000 for 2021/2022. Camilla makes monthly contribution of 750 towards the running cost of the flat. The company has also furnished the flat at the cost of 42,000.

Loan: Her employer also lent Camilla 40,000 at an interest rate of 1% per annum when she joined the company. Camilla repaid 5000 in January 2022

Mobile Phone: She is provided with a mobile phone and is allowed to use it for both private and business calls. The company paid all charges of 520 during the year, 130 of which related to private calls.

Car and Fuel Payment: Camilla used her own car for business travel till 6 October 2021, at which point she was provided with a company car. During this period she travelled 15,000 miles on company business in her own car.

The car provided to Camilla had a list price of 50,000, and a carbon dioxide emission rating of 146g/km. The company paid all the running costs of the car, including fuel.

Camilla contributed 100 per month towards the use of the car which includes 50 towards some of the petrol.

Private Medical insurance: The Company paid 1,000 for her Private medical insurance.

Gym Membership: The Company paid the monthly 100 fee which she joined when she started her job.

Camillas other income for 2021/2022 consisted of gross pay from her previous employer of 40,000 on which PAYE tax of 3,500 was deducted. She also earns interest of 200 from her Cash ISA account and has dividend income for the tax year of 2,550.

Camillas parents who are in their late 80s and in good health. Her father is a keen pottery maker and still does some work for selected clients earning around 20000 per annum. Her mother is retired, and has dividend income of 1000. Both her parents gets the basic state pension of 9500 each.

Required:

You have been asked by your firm to write a letter to Camilla covering the following. Workings should be shown in the Appendix.

a. Calculate Camillas taxable income for tax year ended 5th April 2022.

b. Calculate Camillas tax payable for the tax year ended 5th April 2022.

c. Explain to Camilla as to the changes she should make to save tax

d. Explain to Camilla the conditions she would have to meet, if she decided to work on self- employed basis.

e. Explain to Camilla whether Married Couple Allowance (MCA) or Marriage Allowance would apply in the circumstances of her parents and how it would benefit them.

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UK TAXATION

tax year 2021/2022