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HMRC internal manual

Employment Income Manual

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HM Revenue & Customs
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Particular benefits: transfer of a computer previously available for use by a director or employee: interaction with limited computer exemption: examples

Sections 206(1) and (6) and 320 ITEPA 2003

EIM21652 explains that the method for calculating the cost of the benefit of the transfer of a computer previously available for private use by a director or employee depends whether or not the computer was first made available for private use before 6 April 2006.

Example 1A computer and associated equipment cost an employer £3,000. It was provided to an employee for three years for private use at home, starting on 1 July 2004. At the beginning of the three years its market value was £2,500. On 30 June 2007, when its market value had fallen to £300, the employer gave the computer to the employee.

The cost of the benefit on transfer is the market value of £300, regardless of the original cost or the original market value less the aggregate of the cost of the benefit charged during the three years when it was loaned to an employee.

This computer qualified for the limited computer exemption in section 320 ITEPA 2003 before its withdrawal with effect from 6 April 2006 and therefore it is an “excluded asset” to which the special rule described in EIM21650does not apply

Example 2A computer and associated equipment cost an employer £2,500. It was provided to an employee for two years for private use at home, starting on 6 April 2006. At the beginning of the two years its market value was £2,000. After two years, when its market value had fallen to £600, the employer gave the computer to the employee.

This computer was first made available for private use after the withdrawal of the limited computer exemption in section 320 ITEPA. This means it is not an “excluded asset” and therefore the special rule in section 206(3) applies as described in EIM21650.

The cost of the benefit on transfer is the market value when the computer was first provided (i.e. (£2,000) less the cost of the benefit for the period during which it was provided for private use.

The cost of the benefit was 20% of the market value at the time when the computer was first provided for private use i.e. £400 for each of the two years during which it was so provided.

So the cost of the benefit of the transfer of the computer calculated in accordance with the special rule is £1,200.(£2,000 - £400-£400).

See the example in EIM21651 for details of how the calculation is affected if the cost of the benefit included running costs and by any payment made for the transfer.

See EIM21650 for an explanation of the treatment of any business use of the asset.

Example 3

A computer and associated equipment cost an employer £3,000. For three years, starting on 1 July 2006, it was used in the employer’s office. After three years its value had fallen to £300 and it was given to one of the office staff.

The cost of the benefit is determined under Section 206(1). The cost of the benefit is the market value at the date of transfer, unless this amount is more than the cost incurred on the computer by the person who provided it (see EIM21655), which in this example it is not. The cost of the benefit is £300.

Although the computer was first provided after 5 April 2006, it was never made available for private use to any employee and therefore the special rule described in EIM21650does not apply.