EIM21651 - Particular benefits: transfer of an asset previously available for use by a director or employee: example
Section 206(3) ITEPA 2003
Example
A company buys a yacht for 拢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 拢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 拢37,500 when its open market value is agreed to be 拢50,000.
The amount of the benefit chargeable in 2003/2004 for the yacht being available for the director鈥檚 use is:
Step in Calculation | Amount |
---|---|
Annual value of the use of the yacht (拢75,000 x 20%) | 拢15,000 |
Add Running expenses | 拢3,400 |
Chargeable benefit 2003/2004 | 拢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 | 拢75,000 |
Less amount taxed as benefit 2003/2004 | 拢18,400 |
- | 拢56,600 |
Less amount paid by director | 拢37,500 |
Chargeable benefit 2004/2005 | 拢19,100 |
If the market value had been 拢60,000 instead of 拢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 | 拢60,000 |
Less amount paid by director | 拢37,500 |
Chargeable benefit 2004/2005 | 拢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.