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HMRC internal manual

Employment Income Manual

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HM Revenue & Customs
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Car benefit: exceptions - no actual private use

Sections 118 and 171(1) ITEPA 2003

This page considers the second part of the two legged test detailed at EIM23400, under which 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.

Actual private use

Even where it is clear that the employer has imposed what is intended to be a meaningful ban on private use, there will still be a car benefit charge if there was any private use actually made of the car during the year in question.

In the case of Gilbert v Hemsley it was accepted that the car was not used for general social, domestic or pleasure motoring. It was used for travel between home and work, but in the particular circumstances of that case it was accepted that home was a place of work and that travel between the two places of work counted as business travel.

But if the taxpayer’s home had not been a place of work, the journey between home and the permanent workplace would not have counted as business travel, and so the car benefit charge would still have applied, irrespective of any ban imposed by the employer.

Handle claims that Gilbert v Hemsley applies using the guidance at EIM32170 and EIM32760 onwards as a guide to the circumstances in which journeys from home to a place of work can be accepted as business travel. (This content has been withheld because of exemptions in the Freedom of Information Act 2000)  

Demonstrating that there has in fact been no private use

The onus in law is on the taxpayer to demonstrate this. The best way for them to achieve this is to keep contemporaneous records of each journey, including the reason for and details of the journey plus the mileage travelled.

The requirement for a prohibition of private use

There are two parts to the test at EIM23400, both of which must be satisfied. The fact that a car was not used privately is insufficient on its own to prevent a tax charge. It is also necessary to show that private use was prohibited; see EIM23405.