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Hi Sir
In this question I used the market value of computer at the time it was given to Mike, which was £2000 and got a use benefit of 566.67.I then used this to compare against the market value at time of gifting (1000 vs 2000 – 566.67) to derive the gift benefit.
However no answers reflect mine and when I checked the solutions, they used the market value when they purchased the computer (£3600). Before Mike, another employee was using it.
Can you please let me know where I went wrong? Even your notes say to use the market value of the item at the time it was given to the employee (Mike in this case).
I’ll appreciate it a lot. Thank you.
Hi
i do not have access to a BPP kit, please let me have more details from the question
47. John is employed by Zebra plc. He was provided with a computer for private use on 6 November 2020. The market value when first provided to an employee was 3,600 and the computer had a market value of 2,000 when first provided to John for private use. Zebra plc gave the computer to John on 5 April 2022 when it had a market value of 1,000.
What are the total taxable benefits for John in respect of the computer for the tax year 2021/22?
a. 2,880
b. 3,300
c. 1,720
d, 1,833I’m really sorry but the question makes no sense as you say the MV when first provided was 3600 then you say it was 2000 and you dont say when John was first allowed to use it privately before it was gifted to him on 5th April 2022.
Also what FA are you using?Basically – an asset available for private use is a BIK at 20% of cost when first provided and that will happen every year up to the date of the gift.
Then if that asset which is a BIK is then gifted the employee will pay tax on higher of:
MV when gifted
MV when first available less BIK paid during the time he used itTry the question again
Thanks for responding. Much appreciated.
I literally typed the question straight from the revision kit (its BPP TX-UK FA 2021 ebook so for this year) and that was the question. The answer they had in the back used 3600 to calculate the use and gift benefits
My answer using what you said (which is what I originally did when calculating) was 1433 gift benefit and 400 use benefit for 21/22 which gave me total taxable benefits of 1833.
My understanding is that when John obtained the computer, the value was 2000. So it probably was in use before by another employee.
Honestly. I am too stuck with this question for long
As of what I understand the chargable value is either M.V at the transfer of asset to employee or the Original value when first asset used by employees minus the taxable value considered Upto the transfer date
(Which ever value is Higher) is taken
So question says the the value when used first by employee was 3600
Later it says it was provided to John on 6 Nov 2020First calculation is made as follow (on Back of Bpp Answer)
Use 3600*20% – 720
Market value at gift – 1000or
Original Value – 3600
Less Use:
2020/21 – (720*5/12) -300
2021/22 – 720
2,580So here greater amount is taken – 2580
Therefore the answer should be 2580 which will be taxable by JOhn starting from in coming year that is 2022/23. (2580*20%) since the transfer is made on 05-April-22
However answer is on other hand is 3300 ( 2580+720) taxable value at transfer + the previous year taxabe figure. which looks bit strange, if i am not mistaken.
How can the whole value (2580) plus the previous year tax value which is already paid is to be taxed in a single year that is at the time the asset is transferred to employee.
Question ask for total taxable benefit for john in respect of computer for tax year 2021/22
Can you please help us in understanding the concept please. Thank you.!!
Gifts of assets
(i) If an employee is gifted a new asset, he is taxed on the cost of the asset.(ii) If an employee is gifted an asset that has previously been used he is taxed on the higher of:
– the market value of the asset when given to him
– the market value of the asset when frst made available to the employee less the beneft
assessed on the employee during the time he had the use of it.These are the rules and if you apply the rules to the question then you get the correct answer.
However, having spent some time reading and re-reading your questions I find the whole thing very confusing as they have used 3600 to do all the calculations and not 2000.
I’m not sure why and I’m not sure how confused I am so my advice is as follows:Move on!
Learn the rules for this benefit in kind.
Find another question and see if, you get the correct answer when you attempt it.
If you do – hey! You understand the rules
If not then come back to me.
Dont sweat the small stuff please!
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