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.
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.
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 |
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.
