Company assets provided to employees for personal use

This post covers the recent changes to the tax treatment of company assets provided to employees for personal use and an overview generally.

Company assets provided to employees for personal use

The first point to mention is that these rules do not apply to company cars,  or company vans -  we've covered these topics in previous posts.

When do these rules apply?

These rules apply when an asset is made available to a director, employee or their family, for private use.

It doesn't matter whether the asset is actually used, it's the ability to use the asset which could result in a tax charge even if the employee, director (or their family) decide not to use the asset concerned.

There will be no tax charge in the following circumstances:

  • The terms on which the asset is made available prohibit private use, and
  • The asset is not used privately

Calculating the benefit in kind for company assets provided to employees for personal use

The amount of the benefit in kind is based on the greater of:

  • The ‘annual value’ of the asset, and
  • The rent or hire charge paid for it by the employer

Plus any other expenditure on the asset by the employer (e.g. running costs, repairs, maintenance, improvements) except for hire charges and loan interest

What is the annual value?

The ‘annual value’ is 20% of the market value of the asset when first used to provide a benefit.  Special rules apply to determine the annual value of land and buildings.

HM Revenue accept that the benefit in kind for a tax year may need to be apportioned where there is mixed personal/business use of the asset, it is made available/used by other employees or is only available for part of the year.

Calculating the apportionment

Previously there were no set rules for calculating the apportionment however now the situation has changed. The new tax rules state that after establishing the benefit in kind above you have to deduct a time apportioned amount for any days when the asset concerned is either unavailable for private use for more than 12 hours, or only used for business purposes,

Where the asset is made available to more than one employee/director for private use at the same time the 'sharing rules' apply.

Where the asset is made available to more than one employee/director for private use at the same time the 'sharing rules' apply.

In this instance the chargeable benefit in kind is reduced for each employee on a just and reasonable basis .The over-riding rule is that the combined total chargeable benefit in kind for all the employees/directors cannot exceed the annual value of the asset.

The sharing rules won't apply where an asset is available to different employees under a rota. In other words they don't have it available for private use at the same time. However a deduction may be available if another employee uses the asset for over 12 hours in a day 

You can see some examples here of how the benefit in kind is calculated.

Other deductions from the benefit in kind value

If you make a payment to make good your private use by 6 July following the end of the tax year (for 2019/20 this will be 6 July 2020) this is deducted from the benefit in kind.

For more useful information, check out our Ebooks here.

And if you'd like to know how we can help you with all of this, or with anything else, feel free to give us a call on 01202 048696 or email us at [email protected].

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