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HMRC internal manual

Employment Income Manual

HM Revenue & Customs
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Car benefit: exceptions - private use prohibited and there is none

Sections 118 and 171(1) ITEPA 2003

Where a car is made available by reason of an employee’s employment (see EIM23250 onwards), the legislation provides that it will be automatically treated as having been made available for private use, Section 118(1) ITEPA 2003. This means that a car benefit charge will automatically apply provided the other conditions in Section 114 ITEPA 2003 are satisfied (see EIM23020).

However, there is an escape from this automatic treatment. The car benefit charge will not apply if:

  • the terms on which the car is made available prohibit private use (EIM23405) and 
  • it is not in fact used privately (EIM23410).

Note that there are two parts to this test, both of which must be satisfied. The mere prohibition of private use is insufficient on its own to prevent a tax charge. It is also necessary to show that a car is not used for private motoring.

Thus a provided car will result in liability even if no private use is made of it unless such private use has been specifically prohibited in advance (precisely because it is available).

Similarly, even if the director or employee shows that private use of a car has been specifically forbidden there must be no private use of it if a charge is to be avoided.

In some cases it will be quite clear from the facts that private use is prohibited and never takes place. However, you may come across cases where it is less clear that the two parts of this test are satisfied. Where you need to give detailed consideration to whether or not the test is satisfied, you need to ascertain:

  • all the facts surrounding the circumstances of the claimed prohibition and
  • irrespective of any prohibition, how the car was in fact used.

A key point that you should bear in mind is that it is the tax definition of private use that counts (see EIM23305) and not the employer’s. So if the employer bans what it calls private use, but does not include travel between home and the permanent workplace in that ban, the ban will not be effective for tax purposes.


Both parts of the statutory condition must be satisfied:

  • there must be an express, legally enforceable ban on private use, and
  • the taxpayer must be able to demonstrate as a matter of fact that there was no private use.