If you use your limited company assets for private and personal use, there are tax implications which may be incurred.
What is a company asset?
A company asset is something owned or created by a business which generally has the use of generating income. Assets differ from expenses as they have an ongoing use from year to year.
Examples of assets include:
•Software and equipment
•Brand names, copyrights, and trademarks
Providing company assets to employees
When company assets are provided to employees for personal use, there are certain tax implications which business owners should be aware of. If your limited company provides an asset to your employee, this is known as a benefit in kind which attracts additional Class 1A National Insurance for the limited company.
The value of this benefit in kind is calculated as whichever is a greater value of:
•The annual value of the benefit itself (20% of the market value of the item when it was first purchased)
•Any hire changes or annual rental fees that the company pays for the item
Added to this is the sum of any running costs associated with maintaining the asset and keeping it available to the employee over the course of the year.
Tax consequences of assets for personal use
The employee pays tax at the highest rate they qualify for on the value of the benefit kind.
Example: a higher rate taxpayer paying tax on an asset value of £320 will pay additional tax to the value of £128, which is 40% of the value of the benefit in kind.
The limited company would also be liable for paying Employers National Insurance at a rate of 13.8% on the total benefit in kind, as declared on the P11D form. This payment would be due on 22nd July after the tax year ends.
It is important to ensure that the invoice for the purchase of the item itself must be made out in the name of the company and the payments should be made from the business bank account. It may be worth considering business insurance to ensure that the asset is covered when it is in the care of the employee unless it is covered by the employees own home insurance.
Need help with asset management?
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