HMRC internal manual

Employment Income Manual

EIM23215 - Car benefit: meaning of without any transfer of the property in it: cars leased to director or employee

Section 114(1)(a) ITEPA 2003

A car benefit charge will only apply if the car is made available to the employee (or member of the employee’s family or household) without the employee (or family member, as the case may be) becoming the outright owner of the car.

It can therefore apply in situations where the car is hired or leased to the employee, whether or not by the employer and whether the arrangement is formal or informal.

Car leased from employer

In some cases, the employee pays all the costs incurred by the employer, an arrangement which it is claimed prevents car benefit applying. This is not true: the car benefit conditions are all met in this case and car benefit applies, as the 2009 First-tier Tribunal cases of Whitby and Ball v HMRC (TC00255) and Stanford Management Services Ltd and others v HMRC (TC00409) demonstrate.

Payments by the employee can only be taken into account as either:

  • capital contributions (Step 3 of the calculation, see EIM24350)
  • payments for private use (Step 8 of the calculation, see EIM25250)

and only then if the statutory conditions relevant to the deduction are met.

Car leased from someone other than the employer

In this case, it is necessary to determine whether the condition “by reason of the employment” is met; see EIM20501.

Car part owned by employee or director

See EIM23210.