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HMRC internal manual

Employment Income Manual

Car benefit: car made available to more than one member of family or household employed by the same employer: secondary condition B

Section 169(4) ITEPA 2003

Before you read this page, check first that the primary condition on EIM23560 is met. If it is not, this page cannot apply.

Condition B

This is met if the making available (note 1) of an equivalent car (note 2) is in accordance with the normal commercial practice (note 3) for an employment of the kind held by M (note 4).

Note 1: making available

This means that such cars are actually made available. This will need supporting evidence (a mere belief or assertion is insufficient). In the absence of such evidence, condition B is not met. This view was supported by the First-Tier Tribunal in the case of S Barnard Ltd v HMRC, TC00491.

Note 2: equivalent car

This means equivalent in terms of size, status, age, list price (but not necessarily the same model). The fact that a car that is not equivalent is made available is irrelevant: if the taxpayer cannot establish that an equivalent car is made available, condition B is not met.

Note 3: normal commercial practice

It is often argued that this condition is satisfied because:

  • it suits the business aims of the employer for this employee to have a car, or
  • the employee’s cash salary is set at a level that is low in relation to the duties performed. Therefore the overall remuneration package of cash salary plus a car is set at a commercial level and reflects the value of the duties performed by the employee.

Neither of these arguments on their own will succeed in demonstrating that condition B is satisfied.

This condition is not directed at ascertaining whether or not the overall remuneration package was set at a commercial level or whether it was in some way commercially convenient for the employer to ensure that the employee in question was provided with a company car.

Instead, the test quite specifically tells us to focus on the making available of the car alone. Is it the case that the making available of an equivalent car is in accordance with the normal commercial practice for an employment of the kind held by M? This will require hard evidence of other employers who actually provide equivalent cars to employees in an employment of the kind held by M.

Note 4: employment of the kind held by M

This means in similar employment with a different employer (if the comparison is with other employees of the same employer, see condition A at EIM23565). Duties, hours of work and level of remuneration need to be similar in order for this condition to be satisfied.

Sometimes it is argued that it is highly significant that the member of the relevant employee’s family or household holds the position of company secretary. But unless the employer is a large company, usually this involves little more than relatively routine administrative duties. If the employer is a relatively small company, the post is not in any way analogous to the same position as the company secretary of a large concern, where it would possibly be more usual for a car to be provided.

Effect of the section

If the primary condition (see EIM23560) and condition B are both met, E is not chargeable for the benefit of the car for that tax year.

If the primary condition (see EIM23560) is met but condition B is not, consider condition A (EIM23565).

Application to vans

This guidance applies equally to van benefit