Income Tax (Earnings and Pensions) Act 2003 section 206

Cost of the benefit: transfer of used or depreciated asset

Section 206 sets out how to determine the taxable cost of a benefit when a used or depreciated asset is transferred to an employee, including an anti-avoidance rule to prevent employers reducing the taxable amount by lending an asset before eventually transferring it at a low market value.

• When a used or depreciated asset is transferred to an employee, the cost of the benefit is generally its market value at the time of transfer, rather than the original cost
• An anti-avoidance rule applies where the asset was previously made available (rather than transferred) as a benefit: the taxable cost is the higher of the market value at transfer or a calculated residual value
• The residual value is found by taking the asset's market value when first used as a benefit and deducting the total annual benefit amounts already charged under section 205 during the period it was made available
• Cars, qualifying computer equipment, and qualifying cycles or cyclist's safety equipment are excluded from the anti-avoidance rule and are simply taxed at market value on transfer