ExpertMedium2 marksMultiple Choice
ACCA · Question 03 · Income tax and NIC liabilities
Section A: Objective Test
EcoDrive Ltd provided its sales director with a new fully electric company car (0g/km CO2 emissions) on 6 April 2023. The list price of the car was £45,000. The company also paid £600 for electricity to charge the car at the director's home. What is the Class 1A National Insurance Contribution (NIC) liability for EcoDrive Ltd for the 2023/24 tax year in respect of these benefits?
Section A: Objective Test
EcoDrive Ltd provided its sales director with a new fully electric company car (0g/km CO2 emissions) on 6 April 2023. The list price of the car was £45,000. The company also paid £600 for electricity to charge the car at the director's home. What is the Class 1A National Insurance Contribution (NIC) liability for EcoDrive Ltd for the 2023/24 tax year in respect of these benefits?
Answer options:
A.
£0
B.
£124
C.
£207
D.
£900
How to approach this question
First, calculate the car benefit. For 0g/km emissions in 23/24, the rate is 2%. £45,000 x 2% = £900. Second, recognize that electricity provided for a company car is exempt from being a fuel benefit. Finally, apply the Class 1A NIC rate of 13.8% to the £900 benefit.
Full Answer
B.£124✓ Correct
For the 2023/24 tax year, the appropriate percentage for a car with 0g/km CO2 emissions is 2%. The car benefit is £45,000 x 2% = £900. The provision of electricity for a company car is an exempt benefit, so there is no fuel benefit charge. Class 1A NIC is calculated at 13.8% on the total taxable benefits. £900 x 13.8% = £124.20.
Common mistakes
Adding the £600 electricity cost to the benefit before calculating Class 1A NIC.
Practice the full ACCA TX — Taxation Practice Exam 5
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