Free use of assets (other than accommodation, employer-provided cars or vans)
If an employer provides employees with free use of assets for their private use, this is a taxable benefit.
This guidance applies to assets such as furniture, computers, or artwork. It does not cover employer provided cars, vans, or employer-provided accommodation, which have separate rules.
Employers must account for the value of this benefit through the Pay As You Earn (PAYE) system. This means the value is subject to the following:
‘Free use’ means that an employer allows their employee use the asset without giving them ownership of it.
The guidance outlined on this page applies to both employees and directors.
Value of the benefit
Note
Any payment that an employee makes to the employer for use of the asset reduces the value of the benefit.
The value of the benefit is the annual value of the use of the asset. This is generally 5% of the market value of the asset when it was first provided as a benefit to the employee. The market value is the amount the employer would have been able to sell the asset for to a stranger.
The market value does not change even where:
- the asset is later provided to a different employee
- the asset increases or decreases in value over time.
Where the employer provides the asset for only part of the year, the employer must calculate the value based on that portion of the year.
Where an employer leases the asset long-term instead of owning it, the value of the benefit is the higher of:
- the annual amount paid for long-term lease
- or
- 5% of the asset’s market value.
If employers pay for running costs related to the asset, the amount that is paid towards the asset is a taxable benefit. Any payments that the employee makes towards these costs reduces the taxable amount.
Employers will need to operate Income Tax, PRSI and USC on the taxable benefit. Employers must report the value of the benefit as part of the employee's gross pay in the period which it is provided.
Loan of art objects
Art objects may be loaned without paying tax in one specific circumstance, that is:
- if they are kept in a building of significance
- and
- Revenue agree that the public have reasonable access to view the object and the building.
- Example 1
On 1 January, an employer furnishes an employee's apartment with new furniture at no cost to the employee, Tim. The furnishings, which remain the employer's property, cost €10,000.
The annual value of the use of the furniture is €500 (€10,000 x 5%).
Notional pay of €500 per year (€9.61 per week or €41.66 per month) must be added to Tim’s wages for calculating:
• Income Tax
• PRSI
• USC.
- Example 2
On 1 August, an employer furnishes an employee’s apartment with new furniture at no cost to the employee, Catherine. The furnishings, which remain the employer’s property, cost €15,000.
The annual value of the use of the furniture is €750 (€15,000 x 5%). As Catherine only has use of the furniture from 1 August (August-December), the annual value must be time apportioned to €312.50 (€750 x 5/12).
Notional pay of €312.50 (€14.20 per week or €62.50 per month) must be added to Catherine’s wages over the period August to December for calculating:
• Income Tax
• PRSI
• USC.
For future years, notional pay of €750 (€14.20 per week, or €62.50 per month) must be added to Catherine's wages for calculating:
• Income Tax
• PRSI
• USC.
- Example 3
On 1 January, an employer provides an employee, Tina, with a painting to be displayed at her home. This asset was first provided as a benefit three years ago to another employee when its market value was €3,000. The painting is now worth €8,000.
The annual value of the use of the painting is €150 (€3,000 x 5%).
Notional pay of €150 per year (€2.88 per week or €12.50 per month) must be added to Tina’s wages for calculating:
• Income Tax
• PRSI
• USC.
- Example 4
On 1 January, an employer provides an employee, Eric, with the free use of furniture, which was previously used in the employer’s showrooms. The furniture originally cost €5,000. The market value on 1 January (when it was first provided as a benefit) based on a professional valuation was €3,500.
The annual value of the use of the furniture is €175 (€3,500 x 5%).
Notional pay of €175 per year (€3.36 per week, or €14.58 per month) must be added to Eric’s wages for calculating
• Income Tax
• PRSI
• USC.