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Question 4a i

Hyssop Ltd wishes to provide assistance with home to work travel costs for Corin, who is an employee.

Hyssop Ltd:
– Is a UK resident trading company.
– Prepares accounts to 31 December each year.
– Pays corporation tax at the small profits rate.
– Is registered for VAT.
– Leased a factory on 1 February 2015.

Corin:
– Is resident and domiciled in the UK.
– Is an employee of Hyssop Ltd, who works only at the company’s head office.
– Earns an annual salary of £55,000 from Hyssop Ltd and has no other source of income.

Hyssop Ltd – assistance with home to work travel costs:
– Hyssop Ltd is considering two alternatives to provide assistance with Corin’s home to work travel costs.

Alternative 1 – provision of a motorcycle:
– Hyssop Ltd will provide Corin with a leased motorcycle for travelling from home to work.
– Provision of the leased motorcycle, including fuel, will cost Hyssop Ltd £3,160 per annum. This will give rise to an annual taxable benefit of £3,160 for Corin.
– Corin will incur no additional travel or parking costs in respect of his home to work travel.

Alternative 2 – payment towards the cost of driving and provision of parking place:
– Hyssop Ltd will reimburse Corin for the cost of driving his own car to work up to an amount of £2,240 each year.
– Corin estimates that his annual cost for driving from home to work is £2,820
– Additionally, Hyssop Ltd will pay AB Parking Ltd £920 per year for a car parking space for Corin near the head office.

Required:
Note: You should ignore value added tax (VAT) for part (a).

(a) Explain, with the aid of calculations, which of the two alternatives for providing financial assistance for home to work travel is most cost efficient for: 
(i) Corin. (5 marks)