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Employee charging for use of own equipment

Tax implications of payment to an employee for use of their equipment

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An employee wants to charge our organisation for the use of equipment they own when they use that equipment for work purposes. The cost of the hire is not based on anything, but just a random amount (although the amount is reasonable). My instinct is that this may be classed as remuneration and is taxable in some way, but I can't quite work out the exact tax implications. Does anyone have experience of this? I know they should personally submit the income in a self-assessment return, but what should we do as an organisation? It makes sense to use their equipment and pay a small hire charge, but I want to make sure we handle this correctly. I've checked HMRC but couldn't find anything relevant.

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By Tim Vane
30th Jun 2020 16:31

If they are an employee, what makes you think it should be self-employment income? You'll have to explain why you think it is not employment income. Surely it's just an expense payment and should be taxed accordingly. Not sure why you can't find it on the HMRC website; there is plenty of info in the Employment Income Manual.

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By Anonymous.
30th Jun 2020 16:32

There isn't a problem as such if the amount paid is a commercial rate. Is the "employe" a person of influence in the organisation? Obviously, if so, the greater the need to ensure the amount being paid isn't excessive and potentially deemed some kind of taxable remuneration.

You need some kind of written agreement in place to cover, say, things like who pays for repairs and insurance and how long the agreement lasts. How crucial is the equipment? If he left the business tomorrow and took it with him, would that cause a problem?

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By paul.benny
30th Jun 2020 16:33

Turn this round: Why as an employer would you want to have an employee use their own equipment? I know we do this for cars (often with rather lax checking that of suitability and of insurance)

If it's a computer, you're into all sorts of risks about cyber security and data protection (remember the penalties for data breaches can be immense).

If it's some other equipment, you have unknown health and safety risks that you cannot readily manage - not just for injury to the owner but other employees and potentially members of the public

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Replying to paul.benny:
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By Anonymous.
30th Jun 2020 16:35

paul.benny wrote:

If it's a computer, you're into all sorts of risks about cyber security and data protection (remember the penalties for data breaches can be immense).

If it's some other equipment, you have unknown health and safety risks that you cannot readily manage - not just for injury to the owner but other employees and potentially members of the public

Good points!

I know some contributors scold those who (like me) think a little beyond the exact question but I think it's good practice when giving professional advice!

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By bluetone
30th Jun 2020 16:42

Thanks Anonymous
The employee isn't a director, but is a member of the management team. The equipment personally cost them £1.3k and they're asking for a £50 hire charge for one job - so it's not substantial. They own the equipment and will pay for repairs. It might just be a one off in which case it's not worth discussing, but if it became regular I just wondered if we should be careful in how we treat it?

Tim Vane - I was asking if it was employment income in which case it wouldn't be caught in self-assessment unless your reporting it under BIK on a self-assessment. Or should we pay it as a hire charge and the employee is then liable to pay tax on his 'business income'.

Yes, there is a lot of info on HMRC on BIKs but I couldn't see anything on the treatment of paying an employee to hire their personal equipment.

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By Rgab1947
02nd Jul 2020 09:34

I would not let an employee use their own equipment. As another poster has said too risky. I would supply them a laptop for business use only with all the required software on it including anti-virus and (am not too technical) limiting sites etc.

That said if you can pay a tax free 45p per mile for business use why can you not pay a tax free amount for an employee using their own equipment?

I just cannot see how a business use payment can be a benefit.

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Replying to Rgab1947:
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By Tax Dragon
02nd Jul 2020 11:25

Rgab1947 wrote:

I just cannot see how a business use payment can be a benefit.

Me neither.

I'd be starting with s62. It's a fee (ss2a - and see Peter's comment below). Question: does it derive from the employment?

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By Tax Dragon
30th Jun 2020 16:43

I've missed a trick. I used to use my own calculator. Never thought of charging them for it.

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By bluetone
30th Jun 2020 16:47

Paul.Benny - The employee owns a very specific piece of equipment which we might only need to use a few times and there is minimal risk to the employee of using the equipment. We are a charity and find it very difficult to raise funds for equipment which doesn't come under a 'funded project'. Again we talking small money here but it's something I've never come across before and wondered how to treat it correctly.

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Replying to bluetone:
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By paul.benny
30th Jun 2020 17:29

That may be true but the obligations on the employer remain.

What is this mysterious specific piece of equipment?

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By bluetone
30th Jun 2020 18:23

A thermal imager for tracking wildlife

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By Southwestbeancounter
30th Jun 2020 18:39

Well I didn't expect that answer! ;-)

I was thinking engineering equipment or something similar LOL!

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By bluetone
30th Jun 2020 16:48

Tax Dragon - now you're talking - if I calculate the cost over 'too many' years........

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By lme
02nd Jul 2020 09:18

For a small amount of money like this, I would write a note on file to justify the expense and your scrutiny to ensure it's fair against other options e.g. a third party rental. Then, I'd process it as an expense claim (as you might with mileage). Otherwise, if you treated them as a supplier, the income would, in their hands, presumably be covered by the £1,000 hobby allowance.

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Replying to lme:
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By Tax Dragon
02nd Jul 2020 10:00

lme wrote:

Otherwise, if you treated them as a supplier, the income would, in their hands, presumably be covered by the £1,000 hobby allowance.

No, it means that they would forego the allowance (which might cost them, if they charge other users). See s783AO.

Edit - if this reply makes it sound as if I disagree with Tim's opening question, let me clarify: I don't.

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By Bertie Black
02nd Jul 2020 09:18

There's surely no wear & tear on the equipment when it's being used for a one-off situation like this. As you're a charity he should be ashamed he's asking for payment.

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By pauljohnston
02nd Jul 2020 09:21

Does the employee realise that he can claim capital allowances on the equipment. I would suggest that if he charges a rent equivalent to that charged by an outside organisation there would be no employee benefit. Just like a room in a house used for business purposes.

If you want more help I suggest you advise us of the cost of the kit. The amounts involved. What is the employee going to use the equipment for apart from the charity. We can then give you more pointers.

What ever you decide make sure that it is put in writing in case HMRC come calling. They are going to have a similar problem if they want to suggest the arrangement is taxable.

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By [email protected]
02nd Jul 2020 10:22

So,
We have a thermal imaging camera worth approx £1.3k owned by the employee. presumably outside of this employment they use it either as a hobby or as a sepreate income stream.

We haven't been told what the employee does for the org in their "normal" capacity but lets assume it is not wildlife photography.

Therefore this "Gig" is sufficiently different to the normal employment that the employee "could" charge a commercial fee for doing the piece of work.

They have chosen instead to charge £50 for the use of the equipment, which on balance seems rather reasonable.
(just did a quick google and you're lookinga t anything between £85 and £500 for a 3 day hire, depending on spec)
Make sure you have an invoice from them for the equipment hire and pay it as such.

I had a similar situation a few years ago - former professional photographer, professional kit, we agreed to cover the business use insurance, and he did our vlogs. (His role was general management for us)

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