SolvedEIM21880 | Asset made available without transfer to a director or employee: when it applies
From HM Revenue & Customs · Employment Income Manual
From 6 April 2017 only
These rules apply if Chapter 10 of Part 3 to ITEPA 2003 (which covers the residual liability to charge) applies and an asset is made available to a director or employee (or their family or household) for private use without transferring ownership of the asset. If so, then sections 205, 205A and 205B ITEPA 2003 set out rules for calculating the cash equivalent of the benefit.
Section 201 provides that Chapter 10 applies to an employment-related benefit, which is:
a benefit or facility of any kind is provided to an employee or a member of the employee’s family or household in a tax year
by reason of the employment
not an excluded benefit (mainly benefits that are taxed under one of the other Chapters of the benefits code) – see section 202 ITEPA 2003
See EIM21002 for full details about how section 201 applies.
From 6 April 2017, the cash equivalent of the benefit is determined under section 205 where an asset is made available for private use (section 205(1)(a)) with no transfer of the property in the asset.
Private use means private use by the director or employee (or their family or household).
Made available does not just mean use, it means the ability to use the asset even if the employee or director (or family or household) decide not to use it.
Example
An employee is lent a games console by his employer for his daughter to use. His daughter does not play on the console. The games console is still available for his daughter’s private use even if she does not use it.
The exception to ‘made available for private use’
The legislation allows for an exception to the ‘made available for private use’ rule. This exception only applies if the terms under which the asset is made available prohibit private use and no private use is made of the asset.
The exception has 2 parts to it and both parts must be met before the exception can apply. These are that:
the terms on which the asset is made available prohibit private use - this means that there has to be a real ban on private use that is recognised by both the person providing the asset and the employee or director (or employee’s family or household) and both parties understand the terms on which the asset has been made available
the asset is not privately used.
Whether the exception applies depends on the terms and conditions under which the asset is made available. The prohibition of use has to be an effective prohibition. That means that both the employee and employer understand that it is forbidden to use the asset privately and as a matter of fact it is not used privately.
Example
An employee is allowed to use a moped and the terms and conditions ban private use. The keys and moped are always kept at the employer’s office when it isn’t being used for deliveries. So the employer or employee are able to demonstrate it’s not used privately.
Exemption under section 316 ITEPA 2003
Where an asset is provided for use by an employee in performing the duties of the employee’s employment then it may be exempt from a liability to tax under the benefits code under section 316 ITEPA 2003. See EIM21611 onwards.
Emergency vehicles otherwise exempt under section 248A ITEPA 2003
An emergency vehicle that is provided to an employee in the emergency services and does not prohibit private use beyond ordinary commuting is liable to tax under section 203 ITEPA 2003.
The cost of the employment related benefit is determined under section 205 ITEPA 2003. See EIM23600 onwards.