SE21699 - Benefits: computers: partial exemption: how the exemption works

Section 156A ICTA 1988

The exemption ( SE21697) creates an exempt "bottom slice" of the first £500 of cash equivalent. If the cash equivalent of computer equipment and running costs exceeds £500, only the excess over £500 figures in the calculation of the benefit to the employee. See the examples at SE21701.

Consequently if an employer owns a computer that he provides to an employee, then for

• computer equipment worth up to £2,500 (annual value 20% of £2,500 = £500), or
• computer equipment worth say £2,000 (annual value 20% of £2,000 = £400) and maintenance expenses of £100 yearly, or
• any other combination of annual value and yearly running expenses that does not exceed £500,

the employer does not have to report any benefit on Form P11D. Remember that the "second hand" market value ( SE21619) of computer equipment will almost always be less, sometimes much less, than the employer paid for it. So in many instances an employer will have nothing to report, and the employee have nothing to put on their tax return, in respect of a provided computer.

If the employer leases a computer that is provided to an employee, the cost of the benefit is the higher of the annual value or the annual leasing charge ( SE21616). For example, if an employer leases over three years a computer with a value of £2,500, the annual leasing cost is £833. This figure exceeds the annual value of £500 (£2,500 x 20%). Consequently the cost of the benefit is the higher figure of £833 but the first £500 is exempt, which leaves the balance of £333 to be charged as the benefit.

The £500 exemption applies for each year of assessment. If the computer is first provided part way through a year the £500 is not time apportioned. The full £500 exemption applies in calculating the cash equivalent for the year. The same applies in a year when the computer equipment ceases to be provided.