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HMRC internal manual

Employment Income Manual

Car benefit: special cases: employees in the motor industry (from 2009/10): when is there a car benefit charge?

All employees chargeable to car benefit are subject to exactly the same legislation. Both the conditions under which car benefit is chargeable (EIM23020) and the calculation of the benefit charge (EIM24015) apply equally to all. In particular, the decision in Pepper v Hart (65TC421) on marginal cost does not apply to car benefit.

However, HMRC recognises that problems arise in applying the law strictly in the three situations described below. The guidance in this section (EIM23800 onwards) explains how HMRC applies the law in those situations. Similar guidance has existed since car benefit was introduced in 1976.

The three situations are:

  • Test and experimental cars (EIM23805)
  • Demonstrator and courtesy cars: is there a benefit charge at all? (EIM23810)
  • Employees with frequent changes of car (“averaging”, EIM23815 onwards)

The arrangements described in these pages seek to build on existing best practice and produce consistency for employers and employees in these situations.

2008/09 and earlier years

This guidance applies only for 2009/10 and later years. Local arrangements applied for years to 2008/09 as described at EIM23750 onwards.