EIM21633 – Particular benefits: assets placed at the disposal of a director or employee: example
Section 205 ITEPA 2003
The following example shows how the chargeable benefit relating to a yacht is calculated. It would apply to all other assets except cars, vans, land and buildings.
Facts
On 6 April a company buys a yacht on the open market for
£25,000.
It immediately makes this available for the sole use of a
director and his family throughout the tax year.
In the same year the company spends £2,400 on insurance,
fuel, maintenance, servicing and mooring charges for the yacht. It
also pays £4,500 interest on a loan obtained to purchase the
yacht.
The company requires the director to pay £1,500 a year
for the use of the yacht.
Calculation of the benefit
The amount chargeable on the director for the benefit from the yacht being made available for his and his family's use is:
|
£ |
|
| "Annual value of the use of" the yacht: 20% of its market value of £25,000 | 5,000 |
| Running costs borne by the employer | 2,400 |
| 7,400 | |
| Less "made good" by the director | 1,500 |
| Amount of the benefit | 5,900 |
Notes on the example
Note that in the example the "market value" of the yacht is
taken as £25,000 as this was the open market price paid by the
company immediately before it was first applied as a benefit.
If the company had leased the yacht for £6,000 a year
from 6 April, £6,000 would have been substituted for the
"annual value of the use of the yacht" of £5,000 shown above
(see EIM21630and
EIM21632).
If, exceptionally, the company had leased the yacht for less
than the "annual value" of £5,000, the lease rent would have
been disregarded. The calculation would have remained as shown in
the example above, based on the annual value of £5,000.
The interest paid on the loan to buy the yacht does not enter
into the benefit calculation.
