Making company assets available for private use

Making company assets available for private use

Tuesday, 11 May 2021

Trains and Boats and Planes? (Assets made available for use)

At this time of year, when P11ds (the return of taxable benefits) come to be completed, it’s not unusual for me to be fielding questions about assets that companies may make available to their directors and employees for private use.

Trains perhaps aren’t the most common example, however, it’s the high value assets which, of course, attract HMRC attention and, since the legislation was changed, with surprisingly little comment, with effect from 6 April 2017, the benefit in kind legislation can be harsh!

I think it’s fair to say that this gets overlooked. Alas, historic agreements with a local inspector of taxes, who took into account the limited actual usage of the asset, and calculated a low benefit, are no longer valid! Usage is no longer the primary consideration. The legislation is quite clear that assets that are available for use by the employee, or a member of the employee’s family or household, are to be treated as if they are available throughout the year, subject to limited deductions.

Those deductions relate to narrowly defined situations where an asset is prohibited or unavailable for private use. So, no qualifying deduction means no reduction in the annual value of the benefit— no matter how little the actual usage!

In practice, that can mean a very hefty benefit in kind charge with accompanying Class 1A national insurance liability for an asset which has a genuine business use and may only be made available to a director/employee infrequently.

A careful assessment as to whether corporate ownership is still the best option, together with a comprehensive understanding of the complicated criteria for claiming deductions for periods of unavailability, is therefore important.

For example, the limits of an employee’s skill or legal status in terms of using the asset isn’t a factor, nor are inclement weather conditions (unless legally the asset is unable to be used) whilst, in HMRC’s eyes, even some contractual arrangements, designed to put an asset beyond use, may not be enough.

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John Weston


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