General and background information

When an employer purchases an item and then transfers it to an employee a taxable benefit will arise, if the employee does not pay the market value of the item at the date of transfer. Of course the argument starts when the taxman doesn’t agree with your market valuation.Therefore always try to obtain two proofs of valuation. This can be as simple as a printout from eBay of similar items.

There are 2 categories of assets set in the P11D Organiser system, either “company cars” or “other property or assets”


For cars transferred the amount chargeable to tax is the second hand value of the vehicle at the date of transfer to the employee less any amount paid by the employee.

Other items

When assets (other than cars), first applied as a benefit after 5 April 1980, are transferred by the employer to an employee (or to members of the employee’s family or household) the amount chargeable to tax on the employee is the higher of:

A. - The market value of the asset at the date of transfer,


B. - The market value of the asset when first applied as a benefit less any sums already taken into account in taxing benefits derived from the use of the asset.


C. - Any amount paid by the employee for the acquisition of the asset.

Cycle to work scheme - Changes to end of scheme arrangements – Transfer of Ownership

The scheme works on the basis that an employee can hire a bike from their employer over a 12 or 18 month hire period, and pay for the benefit through a Salary Sacrifice arrangement.  At the end of the hire period, an employer may sell the bikes to employees at a fair market value at that time, though in accordance with scheme legislation there is no automatic right for the employee to purchase the bike at the end of the hire term. At the end of this period, the employee may wish to take ownership of the secondhand bicycle and the transfer of ownership at this point could give rise to a benefit in kind.  

HMRC have provided a set matrix of pre-determined values, which would not be challenged if adopted.  The percentage values are based on the value of the bike and safety accessories at the outset of the hire term and the age of the bike at the point at which a transfer of ownership may take place.

Age of cycle

Acceptable disposal value percentage.
Original price of the cycle less than £500

Original price £500+
1 year
18 months16%21%
2 years13%17%
3 years8%12%
4 years3%7%
5 years
6 years & overNegligible

Further information on the transfer of bicycle to employees from the HMRC employment income manual:-
Particular benefits: bicycles: transfer of bicycle to employee

As explained at EIM21664, employers commonly offer loans of cycles to employees under salary sacrifice arrangements. It is not unusual for a cycle to be sold to an employee after the end of the loan period.

If ownership of the cycle is transferred to an employee after a period of use as a benefit during which the exemption described in EIM21664 applied, this may fall within the meaning of “earnings” in section 62 ITEPA 2003 (see EIM00540). To the extent that section 62 does not apply, the transfer will be a benefit and the cost of that benefit is the market value at the date of transfer. This is different from the “special rule” for working out the taxable amount under the benefits code when assets are transferred after a period of use as a benefit (EIM21650).

Even when the tax charge arises under section 62 the liability is returned on form P11d because the charge arises on a non-monetary asset, rather than being collected through PAYE. Only Class 1A NICs will be due.

If a cycle is transferred to an employee at a nominal value (say 5 to 10% of the original retail price), then if the market value is higher, the employee will be taxable on the difference. See EIM21667a for details of an optional simplified approach to valuing cycles sold after the end of a loan/ salary sacrifice period.

The exemption from tax and NICs for loaned or hired cycles only applies where there is no transfer of the property in the cycle or equipment in question. This means that the exemption will cease to apply if ownership is transferred to an employee. Similarly, the exemption will not apply if any agreement builds in from the outset an automatic transfer of ownership to the employee at the end of the hire period.

Information required

The cost or market value of the assets at the date of transfer, the amount of any payment by the employee or from which tax has already been deducted, with the difference being the cash equivalent.

Measure of benefit

The benefit is normally the market value, less any payment made by the director or employee for the asset. Market value is defined as the price that it might reasonably have been expected to fetch in a sale on the open market. The notes below expand this definition to cover circumstances where this does not strictly apply.

Practical Points

  1. If the asset is purchased by the employer and is immediately transferred to the director, employee or member of his family or household, the higher of market value or cost determines the benefit. It is important that the employer actually purchases the asset and does not simply settle an employee’s pecuniary liability, as this would create a liability to Class 1 NICs and fall to be reported in section B.
  2. An asset transferred, used or depreciated since purchase is taxable on its market value.
  3. If the asset (except a car, van, bicycle or cyclist’s safety equipment or property that has been used as living accommodation) is firstly loaned and then transferred to the employee, the benefit is calculated by first taking the market value when the asset was first provided as a benefit. Then deduct the amount that has been assessed as a benefit in earlier years, the result giving the assessable amount unless the market value at the time of transfer is greater.
  4. For those assets excluded above which have previously been made available as a benefit, including exempt bicycles, you should use the market value at date of transfer.
  5. Any amount paid by the employee is deducted from the cost or market value to arrive at the cash equivalent.
  6. Tax is deductible under PAYE from awards of readily convertible assets. These include assets tradable on recognised investment exchanges or for which trading arrangements either exist or may come into existence. Such awards are subject to Class 1 NICs, not Class 1A NICs. Awards of readily convertible assets are not reportable in Form P11D (CWG 5 Appendix 1)

P11D Form: Section A

P11D Guide: Section A

Assets transferred (cars, property, goods or other assets)

Enter either:

  • the market value of the asset at the date of transfer
  • a figure based on the cost to you

Read chapter 6 of booklet 480 - an expenses and benefits guide for further information.   

Asset transferred to a director or employee or a member of his or her family or household after the asset has depreciated or been used

Where an employee (or member of the employee’s family or household) benefits from the transfer of an asset (other than a car, van, exempt bicycle or cyclist’s safety equipment – see Chapter 5 – or living accommodation) at less than its market value, the benefit for tax purposes is the difference between the sum (if any) paid for the asset by the employee and so on and the higher of:

• the market value of the asset as at the date of transfer, or

• the market value of the asset when first applied as a benefit minus any sums already taken into account in taxing benefits derived from the use of that asset

Where an asset not within the preceding paragraph (for example, a car, or something which had never been applied as a benefit) is similarly transferred and the asset has been used or has depreciated in value since its production or acquisition by the person transferring it, tax is charged on the market value of the asset at the time of transfer to the employee minus any amount paid for it by the employee.

Additional HMRC Documentation and external help 

Click the links below to go directly to the HMRC website to download or view the PDF or help files listed below.

HMRC P11D Guide
HMRC Booklet 480 (Chapter 6)