Q%20and%20A%20ch%2003-all

Q%20and%20A%20ch%2003-all - 14 edition Question 3-1 Discuss...

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14 edition Question 3-1 Discuss briefly the assessability of the following items with respect to salaries tax: (a) A $200 cash coupon given by an employer to an employee as a wedding gift. (b) An ex-gratia payment by the employer in the form of a gold coin in recognition of a job well done . The coin had a face value of $1,000 but a market value of $2,000 at the date of payment. (c) A gas bill settled directly by the employer for quarters occupied by an employee who had entered into the contract with the gas company. (d) Payment in lieu of notice made by the employer for early termination of employment of an unsatisfactory employee. (e) Payment to a retiring employee for entering into a covenant whereby he agreed not to compete in future with the employer in the same field. (f) Tips given to a waiter in a restaurant. (Adapted from ACCA/HKSA Paper 2.3H D89Q6) Answer for Question 3-1 (a) As the cash coupon is a personal gift and not a reward for services, it is not assessable to salaries tax (Hochstrasser v Mayes 38 TC 702). (b) So far as the payment was a reward for services, the fact that it was not stipulated in the employment contract would not affect its assessability. Furthermore, as the gold coin had a cash equivalent of $2,000, it is this figure that should be assessed. (c) In this case, as it was the employee who had entered into the contract with the gas company, he had the liability to pay the gas bill. By paying the bill, the employer had in fact discharged the obligation of the employee. This is clearly 'money's worth' and is assessable to salaries tax. (d) The nature of such a payment is, in essence, compensation or damages resulting from the employer's failure to give the requisite notice. Hence, this item is not assessable in the hands of the employee because it is not a reward for services. (e) The payment to a retiring employee for entering into a restrictive covenant is not assessable because it is not a reward received by virtue of the employee's employment. (f) Payment from someone other than the employer is assessable if the payment is income from the employment. Hence, the tips given to the waiter are clearly assessable In any event, the assessability of receipts from a third party is covered by the inclusion in s 9(1)(a) of the words'. .. whether derived from the employer or others . ..'. Question 3-2 Mr Ho joined C Restaurant Limited on 1 April year 0 working as an accountant at a monthly salary of $10,000. In addition, he was provided with a flat which was leased by his employer at a monthly rent of $3,000. On 1 July year 1, C Restaurant Limited applied to the stock exchange for listing of its shares.
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This note was uploaded on 09/29/2011 for the course ACCT 3161 taught by Professor Kwong during the Spring '11 term at CUHK.

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Q%20and%20A%20ch%2003-all - 14 edition Question 3-1 Discuss...

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