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Benefits Code II: Not Low Paid Employees |
17 |
employee a cat, the cash equivalent will be the sum of (a) 20% of the cost of the cat plus (b) the full cost of food and any veterinary services paid for by the employer. |
The costs of acquisition or production of the asset are excluded from (b) presumably because they are taken into account under (a). Acquisition and production have been construed widely. Expenditure resulting in the replacement or renewal of the asset as distinct from its maintenance is excluded; on this basis sums spent on supplying a house with a new water main were not part of (b) and so escaped tax.82 |
17A.3.6 Transfer of an Asset after Use by Employee |
If an asset is subsequently transferred to the employee, E, section 206 normally charges E on the market value of the asset when it is so transferred.83 However, a different rule applies if it would give rise to a higher charge.84 The problem arises when an asset, eg a hi-fi, is lent to E and has depreciated significantly in value when the employer transfers it to E. The cash equivalent for the first 2 years will have been calculated on the basis of the rules already considered. Under section 156(4) the cash equivalent on the transfer to E is the greater of (a) the asset’s market value at that time less any price paid for it by the employee, and (b) the market value when it was first provided but with a deduction for amounts already taxed and any sum paid for it.85 This alternative does not apply to cars. |
17A.3.6.1 Example |
R provides E with a hi-fi costing £600. After 2 years R sells the system to E for £150, its market value being £250. E is liable on the higher of: (a) £250 2 £150 5 £100; and (b) £600 2 (2 3 20% 3 £600) 2 £150 5 £210. E is therefore liable on (b). |