INTM601620 - Transfer of assets abroad: The benefits charge: Examples of amount or value of benefit

All the examples given below are presented on the basis that the benefit is provided out of the assets available for the purpose as a result of the transfer or one or more associated operations and that all other conditions for a benefits charge are met. The examples are in relation to benefits provided before 6 April 2017 when new rules were introduced regarding the valuation of certain benefits. Details of the new rules can be found in INTM603620 onwards.

Receipt of a monetary payment

Where the benefit received is money, generally speaking the amount or value of the benefit is likely to be the amount received. As INTM601580 explains, where the payment is received in foreign currency, the amount or value will generally be determined by applying the appropriate sterling exchange rate at the date of receipt.

Rent free accommodation

Where the benefit received is the provision of accommodation without charge to the individual, the amount or value of the benefit is likely to be determined from a consideration of the market rental that the property may have fetched at the time the benefit is received.

It must be kept in mind that the language of the provision is of an individual who ‘receives’ a benefit. Therefore where, as in the case of rent free accommodation, the individual goes on receiving the benefit by continuous occupation of the property there is in effect an ongoing and continuous benefit. As taxation of a benefits charge is for a tax year, it will generally be appropriate to consider the amount or value of the benefit for that entire period, where there is a continuous provision of a benefit for the whole or part of that period. It will therefore be appropriate in such instances to consider the ‘annual value’, or appropriate proportion thereof, of the benefit received, not merely any value at the point of first receipt. Thus, in the case of rent free accommodation, it will not only be appropriate to consider the amount or value of the benefit during the particular tax year, but if that benefit continues to be provided, to consider its value for each subsequent period during which there is continuing provision, and to have regard to any changes that may occur in the value of the benefit (for example because of changes in marketplace for rental values). These principles of continuous provision are likely to apply to most situations where an asset is made available for use over a period of time (see below).

Asset made available for use

The principles to be applied where an asset is made available for use by an individual are likely to be similar to those described above for rent free accommodation. Where the benefit provided is on an ongoing and continuous basis it will generally be appropriate to look at the tax year as a whole and consider the ‘’annual value’’ of the use of the asset in relation to that tax year (or part thereof), together with any ongoing costs to the person providing the benefit of its provision for use by the individual. It may also be appropriate to reduce the value of the benefit where the individual meets costs associated with the asset that would normally be incurred by the owner of the asset. Subject to obtaining any necessary professional valuation advice, as a rule of thumb it may be appropriate to adopt a methodology for the benefits charge regarding the use of assets similar to that applied in the employment-related benefits field where an asset is made available for the use of an employee (see for example ITEPA05/S205).

Asset passed to the individual

Where the benefit received is in the form of an asset, other than cash, and the ownership of that asset actually passes to the individual as opposed to an asset being made available for use which remains in the ownership of the provider. The amount or value of the benefit is likely to be determined by reference to the value of the asset at the point in time when it is received by the individual. In most cases this is likely to be similar to the approach that may be adopted for capital gains purposes where it may be appropriate to determine the open market acquisition value of the asset to the individual.

Satisfying a debt

Where the benefit received takes the form of a personal debt or liability of the individual being settled on the individual’s behalf, the amount or value of the benefit is likely to be determined as if the individual had received an equivalent amount of money. There are a variety of circumstances that may come under this heading, from the provision of credit or debit cards, making direct payments to a third-party service provider (such as for children’s school fees), or the settling of an outstanding personal liability (such as a utility bill or personal tax liability for example).

Loans

INTM601640 gives examples where loans are involved.

Note

If the individual receiving a benefit makes any contribution towards that benefit, the contribution will normally be taken into account in determining the amount or value of the benefit.

For example, an individual is provided with accommodation that is a benefit for the purpose of the benefits charge. It is agreed that the value of the use of the accommodation based on rental is £10,000 for the tax year. In that year the individual pays a rental of £5,000. It will be appropriate to take account of the contribution such that the amount or value of the benefit is regarded as £5,000.