Chapter 5 - Loans to Employees and Use of Assets

Question 1

Loans to Employees

Answer 1

Two ways to calculate: average and strict. If the loan(s) never exceeds £10,000, the taxable benefit is 0.

Question 2

Average Method

Answer 2

(Loan at 6 April + Loan at 5 April)/2 x ORI

Question 3

Strict Method

Answer 3

Done on daily or month basis. E.g:
[loan] x x/12 x 2.5%; +
[amount left] x remaining months/12 x 2.5%

Question 4

Average or Strict

Answer 4

Employer reports the loan benefit using average method to HMRC. Taxpayer can elect for strict if lower. HMRC will insist on strict if the benefit would otherwise be significantly distorted

Question 5

Use of Assets

Answer 5

Benefit is higher of:
- annual value of use; or
- the sums paid by the employer in providing the asset by way of rent or hire charge
Annual value is 20% of MV when first made available. Employee contribs are deductible. Apportion by 12 for non-full year use.

Question 6

Use of Asset Formula

Answer 6

20% x MV at date provided

Question 7

Transfer of Assets

Answer 7

Benefit is higher of:
- market value at date of transfer
- market value at date originally lent to employee less any amounts charged to tax for use of asset.
HMRC will take whichever is higher

Question 8

Cars and Houses

Answer 8

Method does not apply to cars and houses. In such cases its just the MV less any employee payments.

Question 9

Use of Computers

Answer 9

If computer equipment is provide solely for business use, there is not benefit. Where partly used privately:

• calculate the benefit normally
• deduct business proportion