INTM601655 | Transfer of assets abroad: The benefits charge: Valuation of benefits - making land available without transfer of ownership

The calculation of the benefit relating to the making available of land is set out in ITA07/S742E. The value of the benefit provided by making land available for the use of an individual for each tax year in which the benefit is provided is calculated as the amount by which:

• the rental value of the land for the period of the tax year during which the land is made available to the individual

exceeds

• the total of the amounts (if any) paid in the tax year by the individual –

  • to the person providing the benefit, in respect of the availability of the land, or

  • so far as not within the previous bullet above, in respect of costs of repair, insurance or maintenance relating to the land.

Note that the calculation above does not apply if the person providing the benefit transfers the whole of their interest in the land to the individual.

The rental value of the land referred to above means the rent which would have been payable for the period if the land had been let to the individual at an annual rent equal to the annual value. The annual value of the land is the rent that might reasonably be expected to be obtained on a letting from year to year if the tenant undertook to pay all taxes, rates and charges usually paid by a tenant, and the landlord undertook to bear the costs of repairs and insurance and the other expenditure necessary for maintaining the property in a state to command that rent.

Example

Sarah is the beneficiary of a non-resident trust. The trustees own a residential property in London and in the year 2019 - 2020 the trustees make the property available for Sarah to live in. In exchange for being allowed to live in the property, Sarah agrees to pay for any maintenance work that is needed on the property. The District Valuer decides that the rent such a property would command is £25,000 per year.

In 2019 - 2020 Sarah does not have to spend anything on the maintenance of the property and so the value of the benefit provided will be £25,000.

In 2020 - 2021 the property starts to suffer from damp, and Sarah spends £5,000 in repairing the property. As a result, the value of the benefit is calculated as £20,000 (£25,000 - £5,000).

In 2021 - 2022 an issue is identified with the roof and Sarah pays £30,000 to repair this. As the cost of the repairs incurred by Sarah during the year exceeds the value of the annual rent, the value of the benefit in 2021 - 2022 will be nil