If a shareholder receives free use of a company asset or use of company-owned accommodation, for a period within the tax year, how would this be reported to HMRC and how would it be taxed on the shareholder? Where would the benefit be shown on the shareholder's Self-Assessment Tax Return? If anyone has any experience of this, or any ideas, suggestions would be appreciated.
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You say the shareholder is not an employee so I assume they are also not a Director.
The company would need to payroll the benefits or complete a P11D depending how they are settled. If they don't then the shareholder should still calculate the benefit and include on their tax return as usual.
The shareholder isn't providing services through a PSC by any chance are they? If so then the PSC would complete the P11D and the benefits would go down under that employment.
It all sounds a bit messy. What is the shareholder doing to receive the benefits, if you also act for the company then are you sure the expenses are deductible? Why is this arrangement in place? I would ask questions since there are likely many tax implications with this set up.
My understanding is that where benefits are given to a participator (or their associate) in a "close" company, the benefit is calculated according to the normal rules but then taxed on the non-employee shareholder as a dividend distribution.
https://www.gov.uk/hmrc-internal-manuals/company-taxation-manual/ctm60510
There is a nasty sting in the tail, as HMRC insist that the relevant expenses are disallowed for corporation tax [https://www.gov.uk/hmrc-internal-manuals/company-taxation-manual/ctm60520] quite apart from the personal tax consequences for the participator.
The shareholder[participator] would include the relevant benefit as a dividend on his or her SA return
Hi Sammerchant. If this is indeed a close company then you need to follow the usual rules for calculating an accommodation benefit for employees and take this equivalent as the dividend distribution. The details are given in the link in my previous post.
This should help. The guidance states that the annual value for an overseas property would be the annual rental value on the open market: https://www.gov.uk/expenses-and-benefits-accommodation/work-out-the-value.
Don't forget to check that you are definitely dealing with a close company before reviewing all the links attached to this thread :)!
HMRC suggest the following answer in https://www.gov.uk/hmrc-internal-manuals/company-taxation-manual/ctm60550
"Accommodation. Strictly the measure of the benefit is that provided by ITEPA2003/S203 to S207 (formerlyICTA88/S156 (5), (6) and (7)). In practice the guidance at SE11431 may be followed as this gives the same result"
See https://www.gov.uk/hmrc-internal-manuals/employment-income-manual/eim11440 for how to calculate the benefit fin respect of overseas property.
Remember to include in calculating the notional benefit any outgoings in respect of the property paid by the company