SE21653 – Benefits: transfer of a computer previously available for use by a director or employee: interaction with limited computer exemption

Sections 156(4) and 156A ICTA 1988

Where a benefit consists in an asset being placed at the disposal of a director or employee, the usual rules are modified if the asset is a computer or peripheral equipment ( SE21697). The first £500 of the cash equivalent of the benefit ( SE21616) is exempt from tax.

If a computer previously placed at the disposal of an employee is subsequently given to an employee (not necessarily the same employee who previously had use of it), the cost of the benefit on transfer is the higher of:

• the market value of the computer at the date of transfer, or
• the market value of the computer when it was first provided as a benefit, less the aggregate amount of the cost of the benefit during the period when it was provided as a benefit.

If the cost of the benefit of the computer was £500 or less in each year when it was placed at the disposal of an employee, there was no tax charge because of the exemption in Section 156A ( SE21697). Consequently it is possible that no tax charge arose during the period when the computer was placed at the disposal of an employee.

Nevertheless when determining the cost of the benefit when ownership of a computer is transferred to an employee, the aggregate cost of the benefit must be included in the calculation regardless of whether or not that cost was wholly or partly exempt from tax by virtue of Section 156A.

See the examples in SE21654.