PTX - help needed in assessing benefits in kind - loans and assets given to employees

Jonno1

Hi, in relation to the previous post, using FA 2012 and Osborne Books practice assessment:

6th April employee provided with an interest-free load of £15,000, during the tax year 3 repayments were made each of £2,000. The remainder of the loan was still outstanding at the end of the tax year. Why is the assessable benefit calculated at £480?

Also, 6th April employee was allowed the use of a home cinema system that had been previously been used by the company. The system had originally cost the company £1,500. but its market value on 1st December was £1,000. Why is the assessable benefit calculated at £200?

Many thanks,

Jonno1

SamiH

Hi Jonno,

You need to use the "simple average" method for the loan.

Begin with the loan balance at the start of the tax year or when the loan was taken out if later. Add the Loan balance at the end of the tax year, or just before then loan ended if earlier. Divide the sum of these figures by 2. Time apportion this based on complete months of the loan, and multiply by the difference between the official interest rate of 4% and the rate paid.

In this case:

£15,000 + £9,000 = £24,000 / 2 = £12,000 . As this is for the full year and no interest has been paid, then £12,000 x 4% = £480



Use of the home cinema - The assessable benefit is the market value @ 20%. So since this had a market value of £1,000, then applying 20%, the benefit calculated would be £200

I hope this helps

Sami

Jonno1

Hi Sami,

Thanks for these tips, they explain everything.

Best wishes,

Jonno1