The example in EIM21638 sets out the facts and tax consequences when a company owned aircraft is placed entirely at the disposal of a director for his use. If the aircraft is not entirely at the disposal of the director the tax consequences may be different as Section 205(2)(a) ITEPA 2003 provides two alternative means of calculation.
The facts in this example are identical to those in the example
in
EIM21638, except that the aircraft is
managed on behalf of the company by an independent third party
agent, which attempts to hire out the aircraft to third parties. If
the director wishes to use the aircraft he must book it through the
agent. In practice he can do so at short notice whenever the
aircraft is not otherwise in use by the public. His hire terms are
preferential to those offered to the public, but if it is already
booked for a commercial hire the director does not have access to
the aircraft.
In such cases where there is genuine commercial use of the
aircraft by third parties, it is arguable whether the aircraft is
available to the director and/or to the employer via the third
party agent on days when it is not in use. Consequently it may not
be reasonable to calculate the benefit to the director based on 234
days of availability, as in
EIM21638.
It may be fairer to calculate the benefit based on the
director’s use relative to total use of the aircraft, as
follows:
| Total amount of the benefit (as in EIM21638) | £140,000 |
| Less proportion for other matters (40/110) | £ 50,909 |
| Benefit after apportionment | £ 89,901 |
| Less made good by the director | £ 6,000 |
| Cash equivalent of the benefit | £ 83,901 |
| Less deduction for business use (10/70) | £ 11,986 |
| Amount of benefit taxable on MD | £ 71,915 |
As in the example in EIM21638, the other director who used the aircraft for 10 days in the year, is also chargeable on a benefit based on his 10 days of use, calculated on the same basis as above.
