Tax Advice and Remuneration Report
Essay by jianqiao li • December 3, 2017 • Essay • 970 Words (4 Pages) • 817 Views
Tax Advice and Remuneration Report
Prepared for
Elizabeth Windsor
Introduction
The aim this report is to inform Mrs. Elizabeth Windsor on the best beneficial format of her remuneration package with concerns to the different tax implications that may occur. Sandringham PLC is a large multinational company and by taking the job as their CEO, Mrs. Windsor has the opportunity to break down her £700,000 package into a format that best suits her desires.
This report has factored into account the well being of Mrs. Windsor and her own interest in owning/driving cars. In addition, we have made suggestions regarding Mrs. Windsor’s possible travel packages, annual phone bills and meal plans.
Its believed that after reading this report, Mrs. Windsor would have a clearer idea on the different options available to her and understand the tax impact of the proposed solutions.
Suggested Remuneration Package
Benefit | Cost |
Salary | £463,225.00 |
Pension Contribution
| £153,767.75 £6232.25 |
Company Car and add-ons | £60,000.00 |
Mobile Phone and Bills (Annual) £539.00+ £600.00 | £1,139.00 |
Meal provision - £10 per day 225 working days x £10 | £2,250.00 |
Annual Function Cost | £150.00 |
Business Travel – Bali Return Ticket (first class) + Hotel £6590+£1190 (7 nights) | £7,780.00 |
Childcare £124 per month x 11 working weeks £11364 per child x 4 kids | £5,456.00 |
Total | £700,000.00 |
Income tax
Basic Rate: £223,994.69 x 20% = £44,798.94
Higher Rate: £118,215 x 40% = £47,286
Additional Rate: £121,015.31 x 45% = £54,456.89
Total Taxable Income: 146,541.83
20.93% of tax of £700,000 Remuneration = £146,510
Difference: £146,541.83 £146,510 = £31.83
Pension Contribution
With a wage of £463,225, Mrs. Windsor is an additional rate taxpayer (45%). It can be advised that you contribute to the pensions scheme as it is a deductible expenditure and it can also raise the tax band. The annual maximum cap for the amount an employee (and employer) can contribute to pension funds each year and claim tax relief on the contribution is at £40000 for 2015/16. This £40,000 per annum cap is transferable to the future, up to three years. It is understood that Mrs. Windsor has various pension funds that have a total value of about £550,000, however it is not clear when the contributions were made. If no contribution had been made in the preceding three years, the maximum you can contribute to the pension this year would be £160,000.
£160,000 includes contributions from both employees and employers. The minimum contribution level by the employer is 1% of the basic wage, which would be £6,232.25.(1%*£6 23,225, wages before any pension contribution). Mrs. Windsor can contribute 153,767.75(£160,000£6,232.25) and still receive tax relief. The administrator will be claiming the basic tax rate applicable to that net sum paid from HMRC and credits Mrs. Windsor, with having paid £192,209.69. [153,767.75/80%]
The grossed up pension contribution that Mrs. Windsor will pay will extend her basic rate tax band to £223,994.69 (31,785+ 192,209.69)
Company Car and Add-ons
Car + Allowance
Aston Martin = £49,640.00
Add: Additional Equipment
Roof rack (kids luggage) = £365.00
Rubber Floormats = £120.00
Total: £50,125.00
Taxable Benefit: £50,125 x 0.25% = £12,531.25 (150g/km of CO2)
* Therefore, The car’s total cost to Elizabeth will be £50,125, with the taxable benefits being only £12,531.25.
Mobile Phone Plan, Meals & Annual Function
Small contributions of the benefits package available to Mrs. Windsor can include other benefits that are exempt from tax such as canteen meals. The average lunch time meal and drink in London will cost approximately £10 a day, which will total to £2,250. This figure excludes holidays and weekends.
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