SolvedEIM21651 | Particular benefits: transfer of an asset previously available for use by a director or employee: example
From HM Revenue & Customs · Employment Income Manual
Section 206(3) ITEPA 2003
Example
A company buys a yacht for £75,000 on 6 April 2003, which is its market value at that date.
The company remains its owner but makes it available for the sole use of a director and his family throughout 2003/2004.
In the same year the employer spends £3,400 on insurance, fuel, maintenance, servicing and mooring charges.
The director does not pay the company anything for its use.
On 6 April 2004 the company sells the yacht to the director for £37,500 when its open market value is agreed to be £50,000.
The amount of the benefit chargeable in 2003/2004 for the yacht being available for the director’s use is:
| Step in Calculation | Amount |
|---|---|
| Annual value of the use of the yacht (£75,000 x 20%) | £15,000 |
| Add Running expenses | £3,400 |
| Chargeable benefit 2003/2004 | £18,400 |
The chargeable benefit arising from the transfer of the yacht to the director on 6 April 2004 is:
| Step in Calculation | Amount |
|---|---|
| Market value of yacht on 6 April 2003 | £75,000 |
| Less amount taxed as benefit 2003/2004 | £18,400 |
| - | £56,600 |
| Less amount paid by director | £37,500 |
| Chargeable benefit 2004/2005 | £19,100 |
If the market value had been £60,000 instead of £50,000 on 6 April 2004 the chargeable benefit for 2004/2005 would have been:
| Step in Calculation | Amount |
|---|---|
| Market value of yacht on 6 April 2004 | £60,000 |
| Less amount paid by director | £37,500 |
| Chargeable benefit 2004/2005 | £22,500 |
This is because the amount chargeable (Section 206(3) ITEPA 2003) is:
the higher of
the market value of the asset at the date of transfer or
the market value of the asset when first made available for the private use of a director or an employee, except for 2015/16 and earlier those in an excluded employment, less the aggregate amount of the cost of the benefit during the period when it was provided as a benefit
less
any sum paid by the individual receiving the asset to the person transferring it.
See EIM21650.