No 2 Kate is an employee of an insurance company in the UK. Kate receives additional benefits such as free medical insurance cover. What effect will these benefits have on her income tax liability? A The benefits are not subject to tax because they are not in the form of cash. B She will be taxed on the benefit at a lower rate than the rate of tax applied to her salary. C She will be taxed on the benefit to her of receiving these benefits. D She will be taxed only on the benefits that are not provided in the normal course of the company s business. Can I know why the answer is C instead of A? No 3 A company s long term finance comprises: ordinary shares £10m, share premium £8m, preference shares £3m, debentures £6m and long terms loans £5m. What is the company s gearing ratio? A 19% B 34% C 44% D 69% Can I know how should this be calculated ? [
Hello! Q2 is testing some knowledge from the tax chapter. In particular that the value of additional benefits such as this medical cover is usually included in the definition of taxable income. Q3 Gearing is Debt/(Debt+Equity). Here, the 10m and 8m are definitely equity. The 6m and 5m are definitelty debt. The tricky one is the 3m of preference shares - legally it is equity, but it's usually treated as debt when calculating gearing.
