A1 Tom Tulliver has been appointed as sales director of Pembridge plc, a company in the building industry. In addition to a basic salary of £83,000, he has been offered a comprehensive benefits package. The proposed deal is:

(i) The company will provide him with a new car which, together with accessories, will cost £19,500. The car has an emission rating of 235g/km. Petrol for private use will be provided but Mr Tulliver must make a contribution of £400 per year towards its cost.

(ii) An interest-free loan of £5,250 will be made to him on appointment and need only be repaid on his leaving the company. The loan will be used to purchase various household items.

(iii) He has a choice of meals in the company canteen, which is open to all staff free of charge, or luncheon vouchers worth £5 per day, an amount equivalent to the normal cost of the meals. He has decided to accept the luncheon vouchers. The normal working year is 200 working days.

(iv) His son, aged three, is presently attending a nursery (which does not have approved childminder status) at a cost of £3,405 per year. Pembridge plc has offered to give his son a free place in their own nursery but Mr Tulliver would like to continue the existing arrangement and for Pembridge to pay the fees to the existing nursery.

Mr Tulliver's wife earns £15,000 per annum. She contributes 6% of her salary to her employer's occupational pension scheme (which operates the net pay arrangement).

Both Mr and Mrs Tulliver have building society accounts which will yield net interest of

£6,400 and £2,208 respectively in 2009-10. Mr Tulliver receives UK preference dividends of £4,680 annually.

Mr Tulliver's appointment will begin on 1 April 2009 and he wishes to examine his and his wife's tax position before the start of fiscal year 2009-10.

Required:

(a) Advise Mr Tulliver on the taxation implications of his employment package.

(b) Advise him of any changes you consider that he should make to maximise the tax efficiency of the proposed package.

(c) Using your answer in

(a) as to the amount of Mr Tulliver's income, advise him of the likely income tax borne by him and his wife for 2009-10 and, again, suggest how the tax position might be improved. (Note: Assume that the official rate of interest is 4.75%).