ACCA Advanced Taxation (ATX) Practice Exam

What is the maximum capital contribution allowed from employees when calculating car benefit?

1. £3,000

2. £4,000

3. £5,000

4. £6,000

The correct answer is: £5,000

When calculating the car benefit for employees, the maximum capital contribution that can be allowed is crucial for determining the taxable benefit. A capital contribution is the amount an employee contributes towards the cost of the car, which can reduce the taxable benefit. According to tax regulations, the maximum capital contribution that employees can make is set at £5,000. This means that if an employee pays up to £5,000 towards the vehicle's cost, that amount will effectively reduce the taxable benefit of the car provided to them. Any contribution above this threshold does not further reduce the benefit calculation. Understanding this limit is important for both employers and employees in managing tax liabilities and benefits associated with company cars. It is essential to stay updated on these figures, as they can change with new tax laws or fiscal policies, but as of the current regulations, the capital contribution limit stands at £5,000.