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HMRC internal manual

Employment Income Manual

HM Revenue & Customs
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Particular benefits: assets transferred to a director or employee: assets transferred before they have been used or depreciated: examples of assets built by employer, costing greater or less than market value

Example 1

A building company constructs a stable block and paddock on land owned by the company. The land cost £20,000 and the buildings and fencing cost £50,000 to build. When the stables and paddock are completed the company receives offers from unconnected third parties to buy the land (with the stables and paddock on it) for £55,000, but it decides to sell it to the director for £45,000.

The stables and paddock have not been used at the time of sale to the director. Neither have they depreciated. They were worth £55,000 immediately after they were completed by the company and the same at the time they were sold to the director.

The chargeable benefit is:

Expense incurred by the company producing the asset £20,000 plus £50,000 (this is more than resale value (£55,000) of the land ) £70,000
Made good by the director £45,000
Chargeable benefit £25,000

Note that this is more than the money’s worth in the director’s hands (see EIM00530). This is because the director got the asset new and undepreciated.

Example 2

A building company constructs a house for a director at a cost (including the cost ofthe land) of £250,000. When the house is completed the company sells it to the director for £250,000. Similar houses are being sold on the open market for £350,000.

The chargeable benefit is:

Resale value of the house £350,000
Less paid by the director £250,000
Chargeable benefit £100,000

Note that in this case the charge arises on the moneys’ worth (see EIM00530) to the director chargeable under Section 62 ITEPA 2003 and not under the special rules in the benefits code. This is because that moneys’ worth (the value of what the director got less what he paid for it) is greater than the expense incurred by the company less the amount made good by the director.