How is the market value of an asset or other benefit determined?

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The concept of "market value" appear throughout the Benefits Code and related reporting rules, in connection with assets transferred, assets made available, living accommodation, classic cars, securities and shares, and readily convertible assets. The same definition, i.e. "the price it might reasonably have been expected to fetch on a sale in the open market at that time" applies in all of these different situations.

Market value is also significant in the context of P9D reporting. With the exception of vouchers, credit cards and living accommodation, the provision of benefits to employees who have an earnings rate of less than £8,500 for a tax year is not reportable under the rules of the Benefit Code. However, if a benefit is provided that has "money's worth", i.e. it can be turned into cash in the hands of the employee, it must be reported on form P9D. The value of the benefit for reporting purposes is its "market value", or second-hand value.

It must be noted that the market value of an asset is not necessarily the same as the price paid for the employer to acquire the asset. The statutory definition above refers to the market value when it was "first applied in the provision of any benefit", not the market value "on the day of purchase". Compare the following examples:

• the market value of a computer that is given to an employee to use a week after it was purchased may be considerably lower than its purchase price
  
  
• the market value of a computer that is purchased by an employee at a retail store using the employer's credit card and who starts to use it immediately is the price paid for the computer
  
  
• the market value of a computer that is built by a computer manufacturer and given to an employee to use is the price that the computer may be obtained on the open market, probably somewhat less than the manufacturer's recommended retail price. Note that this is more than it cost the company to make the computer.

Other values that are sometimes used by employers to determine market value but that are not reliable guides are:

• the highest amount bid by employees in an in-house auction for unused company property
  
  
• the book value of an item in the company's accounts.

There are no rules about where an employer should obtain the "market value" of any particular item. The following suggestions may be useful but, in the event of an HMRC compliance audit, the employer should be able to justify in some sensible manner the source of the market value figure that was used to determine the reportable value of a benefit.

• Exchange & Mart magazine, or website at www.exchangeandmart.co.uk
  
  
• specialist magazines and websites for the type of asset in question, e.g. www.whatcar.com and www.carsource.co.uk
  
  
• local and national newspapers and magazines with classified sections
  
  
• local second-hand dealers for the type of asset in question
  
  
• the prices at which items have sold on Ebay, at www.ebay.co.uk
  
  
• general web search for "second hand" in the UK
  
  
• local and national estate agents
  
  
• Glass's Guide, at www.glass.co.uk.
  
  

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