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HMRC internal manual

Employment Income Manual

HM Revenue & Customs
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Particular benefits: assets placed at the disposal of a director or employee: assets used partly for private purposes and partly for work purposes: mixed use benefit; background to example in EIM21638

Sections 204 and 205 ITEPA 2003

See EIM21638 for an example of the interaction between:

  • the calculation of the cash equivalent of a benefit where an asset is placed at the disposal of a director or employee (Section 205(1)(a)(i) ITEPA 2003) and
  • making an apportionment of that benefit where it is available to a director and for “other matters” (Section 204 ITEPA 2003).

Where a benefit is provided partly for the use of a director or employee and partly for “other matters” the cost of the benefit must be apportioned (see EIM21200) between the different uses.

Note that an asset placed at the disposal of a director or employee represents a benefit (Section 205(1)(a)(i)) regardless of the use, if any, to which the director or employee puts the asset. But see EIM21631 for details relating to the two alternative measures of charge and when to apply one or the other.

If the asset is used wholly for business purposes, this does not prevent the provision of the asset representing a benefit. If the business use satisfies the terms of Section 365(1) ITEPA 2003, the director or employee will be entitled to a deduction equivalent to the full amount of the benefit, leaving no amount chargeable to tax. But this is not the same as there being no benefit. A benefit has been provided but because of the deduction for business use, the chargeable amount has been reduced to nil.

If the benefit is used by a director or employee for private purposes and for business purposes, the business use is not an “other matter” which can be included in the amount of the benefit to be apportioned under Section 204 ITEPA 2003. The full amount of the mixed use of the benefit is chargeable to tax, subject to a deduction under Section 365(1) ITEPA 2003 for any business use that meets the conditions of Section 336 to 338 ITEPA 2003 (see EIM21210).

On the other hand, use of the asset by other employees, or by the employer company (for example, for transporting goods or customers), or hire to third parties, are “other matters” to be taken into account in an apportionment.

There are no hard and fast rules for calculating the proportion of cost attributable to different uses but the end result should produce an apportionment that is reasonable in the light of the facts of the case and the statutory context in Section 204 (see EIM21200).

See the example at EIM21638.