Free Use of Assets (other than accommodation, company cars or vans)
Calculation of taxable benefit
Where an asset (other than accommodation, company cars or vans), which continues to belong to the employer, is provided by an employer for use by an employee, the annual value of the use of the asset is 5% of the market value of the asset when it was first provided as a benefit by the employer to that employee or any other employee. This is the amount that must be taken into account when calculating the taxable benefit which is to be included as notional pay for the purposes of PAYE and PRSI.
Motorcycles weighing less than 410 kilograms fall into this category.
Any other annual running costs incurred by the employer are a taxable benefit, less any amount made good by the employee.
If any annual amount paid by the employer for the rent or hire of the assets is greater than the annual value as calculated in the previous paragragh, the notional pay will be that annual amount paid by the employer.
Examples of calculations
The taxable benefit in respect of the asset will apply for each tax year for which an employee has the free use of an employer-owned asset. Where there is free use of an asset for part of the year only, the amount of the taxable benefit should be time-apportioned.
Example 1
On 1 January 2007, an employer furnishes an employee's apartment with new furniture – at no cost to the employee. The furnishings, which remained the property of the employer, cost €10,000.
The annual value of the use of the furniture is
€10,000 x 5% = €500.
Notional pay of €500 (€9.61 per week / €41.66 per month) must be added to the employee's money, wages, or salary for the purposes of calculating PAYE and PRSI.
Example 2
On 1 August 2007, an employer furnishes an employee’s apartment with new furniture - at no cost to the employee. The furnishings, which remained the property of the employer, cost €15,000.
For the tax year 2007, the annual value is €15,000 x 5% x 5/12 = €312.50.
Therefore, notional pay of €312.50 for the full year must be added to the employee’s money, wages, or salary over the period 1 August 2007 to 31 December 2007 (i.e. €14.42 for each week or €62.50 for each month during the period) for the purposes of calculating PAYE and PRSI.
For the tax year 2008 and subsequent years the annual value is €750 (€15,000 x 5%).
For those years, notional pay of €750 (€62.50 per month / €14.42 per week) must be added to the employee’s ordinary wages or salary for the purposes of calculating PAYE and PRSI.
Example 3
On 1 January 2007, an employer provides an employee with the free use of an asset which had previously been used by another employee. At the time the first employee was given the use of the asset it cost €3,000. This is the market value of the asset when first provided as a benefit.
The annual value in the case of the second employee is
€3,000 x 5% = €150
Notional pay of €150 per annum (€2.88 per week / €12.50 per month) must be added to the second employee’s money wages or salary for the purposes of calculating PAYE and PRSI.
Example 4
On 1 January 2007, an employer provides an employee with the free use of furniture which was previously used in the employer’s showrooms. The original cost of the furniture was €5,000. The furniture was professionally valued at €3,500 as at 1 January 2007 – the date the furniture was first provided as a benefit.
The annual value is €3,500 x 5% = €175.
Notional pay of €175 (€3.36 per week / €14.58 per month) must be added to the employee’s money wages or salary for the purposes of calculating PAYE and PRSI.
Free use of 'Lands'
For 2005 and subsequent tax years the method used for calculating the taxable value of the use of lands will be the same as that for premises (i.e. the rent it might reasonably be expected to obtain on a open market letting from year to year). The Finance Act 2005 inserted a new definition of ‘premises’ to include ‘lands’. Prior to this amendment the taxable value on the use of land was determined by reference to 5% of the current market value.
Loan of Art Objects
There is no charge to tax in respect of the loan of art objects kept in buildings of significance where the Revenue Commissioners have determined that the public have reasonable access to view both the object and the significant building.