ACCA Advanced Taxation (ATX) Practice Exam

Under employment tax regulations, does the car benefit for an employee include running costs?

1. No, only the purchase price is considered

2. Yes, it includes both the benefit and the running costs

3. Yes, but only if the running costs are specified

4. No, only the fuel costs are included

The correct answer is: Yes, it includes both the benefit and the running costs

The car benefit for an employee does indeed include running costs in addition to the benefit derived from the use of the vehicle itself. This means that when calculating the overall car benefit, aspects such as insurance, maintenance, and fuel costs associated with the car are taken into account. This holistic view is vital because it reflects the total cost incurred by the employer in providing the vehicle, which impacts the taxable benefit amount reported on the employee’s tax filings. Understanding this inclusion is crucial for both tax compliance purposes and for financial planning by employers. Not only does it provide a clearer picture of the actual benefits received by the employee, but it also ensures accurate reporting for tax purposes. It underscores the importance of recognizing the full scope of vehicle benefits in employment tax regulations.