Where employees are provided with living accommodation, a car or a van, any private use is usually subject to specific scale charges or other rules. This article considers the provision of two further classes of assets provided for an employee’s or director’s personal use.
The cash equivalent of the asset provided is the annual value of the asset’s use, plus expenses (other than costs of acquisition) incurred in connection with the asset that would not have been incurred without the provision of the benefit.
- Land: the annual value of the asset’s use is the greater of the gross rateable value when the property was last rated, and any rent paid by the provider.
- Assets other than land: the annual value of the asset’s use is equal to 20% of the asset’s market value when it was first used to provide a benefit. If the provider paid rent for the asset that was more than the 20% calculation, then the higher figure is used.
If an asset is provided for part of a tax year the above cash equivalent figures would be adjusted accordingly.
For example:
A company buys a boat for a director’s private use on 6 April 2013 for £25,000. It takes out a loan to buy the boat and interest charges are £4,500 in the year to 5 April 2014.
Running costs paid by the employer in the year are £2,400 and the director makes a contribution of £1,500.
The benefit would be £5,900 (20% of £25,000 plus expenses £2,400, less £1,500 made good by the director).
The bank interest charges are disregarded as they are part of the cost of acquisition.