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HMRC internal manual

Employment Income Manual

Asset made available without transfer to a director or employee: how to calculate the annual cost of the benefit (step 1)

Sections 205 and 205A ITEPA 2003

From 6 April 2017 only

Step 1: Calculate the annual cost of the benefit

The annual cost of the benefit of an asset (but not land) is 20% of the market value of the asset at the time when the asset is first applied as an employment-related benefit (section 205(2) ITEPA 2003). It also includes additional expenses (that is expenses incurred in or in connection with providing the asset except the cost to the person of acquiring or producing the asset or hire charges paid by person providing it) (section 205(4) ITEPA 2003).

Market value will normally be the cost of the asset when first applied as a benefit in kind at the time it is bought by the person providing the benefit. If there is a dispute about what the market value of an asset is when it is first applied as a benefit then you should refer the issue to your specialist support in the first instance.

The annual cost of a benefit that is land is the rent that might reasonably be expected to be obtained on a letting from year to year if (section 207 ITEPA 2003):

  • the tenant undertook to pay all usual tenant’s taxes, rates and charges and
  • the landlord undertook to bear the costs of the repairs and insurance and other expenses, if any, necessary for maintaining the land in a state to command that rent