119 Valuation of benefits in kind

Summary

This section provides rules for the valuation of benefits in kind. In general, the amount to be regarded under section 118, as remuneration is so much of the expense incurred by an employer in providing the benefit as is not made good by the employee or director.

Details

(1) The initial cost of acquisition or production of an asset which remains the employer’s property is not treated as remuneration of the person who has the use of it.

(2) Where the benefit to a director or employee takes the form of the transfer of an asset after it has been used or depreciated, its market value at the date of transfer and not the cost of acquisition to the employer is treated as the director’s or employee’s remuneration.

(3) Where an asset of the employer is used by a director or employee, the benefit to be assessed on the director or employee is, in addition to any current expenditure incurred by the employer in connection with the asset, the greater of —

• the annual value of the use of the asset, and
• the amount payable in respect of any rent or hire of the asset.

The annual value of the use of an asset is taken to be—

1. (4)(a) in the case of premises, the rent which might reasonably be expected to be obtained on a letting from year to year (the annual letting value), if the tenant undertook to pay all the usual tenant’s rates and if the landlord undertook to pay the costs of repairs, insurance, etc necessary to maintain the premises in such state as to command that rent, and
2. (4)(b) in the case of any other asset, 5 per cent of the market value at the time it was first provided by the employer as a benefit-in-kind. [NOTE: This provision operates with effect from 1 January, 2004. Prior to that the 5 per cent valuation operated on an administrative basis.]

Relevant Date: Finance Act 2021