There’s a lot to consider when it comes to employees using assets for private use.

 Start with a simple or not so simple question – what is the taxable benefit in kind to an employee or director when the employer allows the employee to use an asset for private use?

 The simple answer is that the employee will have a taxable benefit in kind of the ‘cash equivalent of the benefit’ which is:

The annual value (or if higher, the rent or hire charge paid by those providing the benefit)


Any expenses related to the asset’s provision (excluding the cost of acquiring or producing it and excluding also any rent or hire charge payable for the asset by those providing the benefit).


Any part made good by the employee to those providing the benefit.

HMRC will treat an asset as being available for private use unless private use of the asset is specifically prohibited and no private use is, in fact, made of it.

The annual value of the use of an asset is:

    1. For land, its ‘annual rental value’ under ITEPA 2003 section 207
    2. For assets other than land, cars and vans, 20% of market value at time asset was first provided as a benefit.

‘Made good’ is where an employee gives something (usually a cash payment) to the person providing the benefit-in-kind in return for it. With effect for all benefits provided in 2017/18 or subsequent years, a general deadline of 6 July following the tax year in which the benefit is provided is introduced by which employees need to make good any part of the cost of the benefit if a deduction is to be allowed for that tax year. Voluntary pay-rolled benefits have their own deadlines for making good.

From 2017/18 the taxable value and the value on which Class 1A NICs are payable is reduced only if the benefit is made good by 6 July following the end of the tax year in which the benefit in kind is provided.

If the employee wants to make good by waiver of remuneration the ‘making good’ payment will need to be made from net earnings after deduction of PAYE and NI in the normal way.

Another key question is: what is cash equivalent?

The expense to be included in the calculation of the cash equivalent of an in-house benefit is the marginal additional expense of providing the benefit. This is the expense that the employer would have saved if the benefit had not been provided to the employee. This was established in the case of Pepper v Hart in 1992.

There are always anomalies and it is worthwhile checking through HMRC manuals. Examples include:

  • school fees where HMRC will normally accept that no additional benefit arises where teachers pay 15% or more of normal school fees if their child or children attend the school in which they teach
  • where a negligible cost arises. HMRC has indicated that nil or negligible cost arises in the following cases:
    • rail or bus travel by employees (provided fare-payers are not displaced);
    • goods sold to employees for less than the wholesale price; and
    • provision of professional services not requiring additional staffing (excluding disbursements).

There will always be a number of adjustments to be made. Errors can occur around areas such as transfer of a used asset and apportionment of the cash equivalent of the benefit.

 Transfer of a used asset

Where the benefit is the transfer of an asset after it has been used or has depreciated since the transferor acquired it, the cost of the benefit is the market value at the time of the transfer.

If the asset (other than a car or van) was first applied for the provision of any benefit for a person or for members of his family or household by reason of his employment after 5 April 1980 – and a person (whether or not the present transferee) has been chargeable to tax on its use – the cost of the benefit (unless a higher benefit is obtained by taking market value at the time of transfer) is its market value when it was first applied less the total cost of the benefit of the use of the asset in the years up to and including the year of transfer. This alternative does not apply to computer equipment or cycles for which different rules apply.

 Apportionment of the cash equivalent of the benefit

For 2017/18 onwards, if the asset is unavailable for private use for part of the year, then the cost of the benefit (computed as above) is time-apportioned by reference to the number of days in the tax year on which the asset is available for private use.

Also for 2017/18 onwards, if an asset is available for more than one employee’s private use at the same time, the cost of the benefit for each employee is reduced on a just and reasonable basis, with the proviso that the aggregate for all such employees cannot exceed the total cost of the benefit (before any apportionment).

 Typical example

On 5 April 2019  employer A Ltd sold some furniture to their employee Mr B for £200. A Ltd had previously leased the furniture to Mr B for £10 per month from 6 April 2017 when the market value was £2,000. At 5 April 2019 the market value of the furniture was £500. A Ltd bought the furniture on 5 April 2017; its business is not connected with the manufacture of furniture.

 View this worked example for further insight

Article from ACCA In Practice