Assets sold to employees

Overview 📘

The information below is useful in understanding the taxable benefits and VAT treatment when a business sells assets (such as laptops or computers) to employees. It also applies when assets are gifted to employees leaving the business.

✅ Taxable Benefits

The first step is to establish the market value of the asset. This is the price it could reasonably fetch in its current condition on the open market. You can estimate this by looking at similar items on sites like eBay or Facebook Marketplace.

• If the asset is sold to the employee at market value, there is no taxable benefit.
• If the item is given for free, the taxable benefit equals the market value.
• If the item is sold below market value, the taxable benefit is the difference.
  • Example: if a laptop worth £1,000 is sold for £300, then £700 is a taxable benefit.
• For a brand-new item, the purchase price is normally used.

Where a taxable benefit arises (because the asset was given for free or sold below market value), the benefit must be declared on the employee’s P11D return. HMRC will then adjust the employee’s tax code, leading to an income tax charge.

🔗 HMRC guidance: Expenses and benefits – assets provided to employees

📊 VAT Treatment

For VAT-registered companies:

• VAT must be charged on the sale of all assets, even when sold to employees.

This rule applies regardless of the reason for the sale.

• If the asset was purchased outside the UK and sold to a non-UK employee, the sale can be zero-rated (no UK VAT).
• In rare cases, companies may opt not to charge VAT when selling an asset to an employee, but they must prove the asset was purchased for business use and later sold because it was no longer needed. Always seek advice before choosing this option.
• The VAT treatment depends on the location of the asset when ownership passes to the employee.
• If an asset is in the UK but then exported outside the UK, no UK VAT is due.

🔗 HMRC guidance: VAT on goods sold to employees

💡 Key Points to Remember

• The asset's current market value determines whether there is a taxable benefit.
• P11D benefit reporting is required if the asset is given for free or sold under market value.
• VAT usually applies, even to sales made to staff.
• The place of supply determines VAT treatment.