EIM21652 – Particular benefits: transfer of a computer previously available for use by a director or employee: interaction with limited computer exemption

Sections 206(2) and 320 ITEPA 2003

explains that the special rule in section 206(3) for working out the cost of the benefit of the transfer of an asset that was previously made available to an employee or director for private use does not apply to assets that are excluded assets.

Section 206(6) defines excluded assets. The definition includes computer equipment that qualified for the exemption in section 320 ITEPA 2003. (See EIM21700)

This exemption was withdrawn from 6 April 2006 and therefore any computer equipment that was first provided for private use on 6 April 2006 or later is not an excluded asset. In other words, it will be subject to the special rule in section 206(3).

On the other hand, computer equipment that was first provided before 6 April 2006 will have been within the limited exemption in section 320 ITEPA 2003 for at least part of the period during which it was provided to an employee and therefore such equipment will be an excluded asset and will not be subject to the special rule in section 203(3).

How to work out the cost of the benefit for transfer of a computer that waspreviously made available for private use before 6 April 2006

If a computer which was previously placed at the disposal of a director or employee for a period that started before 6 April 2006 is subsequently given to an employee (not necessarily the same employee who previously had use of it), the cost of the benefit that arises on transfer of ownership is different from the rule that applies to assets generally ( EIM21650). In these circumstances the cost of the benefit is the market value on the date of transfer, as determined by Section 206(1) and (2) ITEPA 2003 ( EIM21655).

If the cost of the benefit of the computer was £500 or less in each year when it was placed at the disposal of the employee, there was no tax charge on the benefit because of the computer exemption in Section 320 ITEPA 2003 (see EIM21700). Consequently it is possible that no tax charge arose during the period when the computer was placed at the disposal of the employee.

Nevertheless when determining the cost of the benefit when ownership of the computer is transferred to an employee, the cost of the benefit is the market value at that date. If an employee makes good or pays the employer the market value for the computer there is no chargeable benefit.

How to work out the cost of the benefit for a computer that was previously madeavailable for private use but not until after 5 April 2006

The special rule in section 206(3) will apply as described in EIM21650.

See the examples in EIM21653.