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John was employed by Z PLC at a salary of 35,000 a year. He was provided with a computer for private use on 6 November, 2013.The market value of the computer when first provided to an employee for private use was 3,600 and had a market value of 2,000 when provided to john for private use.Z PLC gave the computer to john on 5 April,2015 when it had market value of 1,000.
My answer ; the taxable benefit is the higher of 1,000 I.e current market value and 2,000 -(17/12*2,000*20/100)=1,4333. but the answer r given is 3,300. pls help me out.Not sure where you got this from but to answer it you need to know the specific requirement – what have you been asked to calculate and you also need to know when the first employee got the use of the asset.
Notwithstanding that further information needed, the answer simply cannot be 3,300the question is what are the total taxable benefits for john in respect of the computer for the tax year 2014/15? by the way, i got the question from BPP revision kit of April 2015 to March 2016 pg. 13. I recheck the question and i copied it correctly. please, what should be the solution.
thanksThe answer to the question gives the explanation as below. ( I copy below)
8.11 B £3,300
Value of computer Use £3,600 x 20% = 720
Gift Current market value £1,000 or Original value £3,600
less use:
2013/14 £720 x 5/12 (300)
2014/15 – 3600 x 20% (720)Original value less use (3600 – 300 -720) £2,580
The greater amount is taken 2,580
Total benefits 2014/15 – 2580 + 720 = 3,300
The total taxable benefits for 2014/15 will consist firstly of the annual benefit for the private use of a company owned asset as the asset was only transferred at the end of the tax year. This is correctly computed in the above answer as 720 (3,600 x 20%) as in computing the benefit we use the market value of the asset when FIRST made available for private use.
However when computing the benefit on the gift of the asset we use the higher of:
(1) the market value of the asset at the time of the transfer = 1,000, or
(2) the market value at the time of the original provision of the asset for private use, which is again 3,600 (as above) BUT reduced by the TOTAL amounts charged on ANY employee as benefits – it is here that the answer goes wrong and why I said previously that you need to know when the asset was originally made available for private use to the previous employee so that those benefits assessed on him / her can then also be deducted and not just what has been assessed over the period of use by John.Dear sir
Thank you so much for the explanation as to how to calculate the benefit.
Thank you Ibrahim for raising the issue for the benefit of all
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