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HMRC internal manual

Employment Income Manual

Car benefit: special cases: test and experimental cars (from 2009/10): when is there a car benefit charge?

EIM23800 provides the background to this page.

The term “test and experimental cars” refers to cars being used for testing in a documented research programme by a manufacturer of either the car or of the specific components under test.

The use for testing purposes of experimental/developmental cars by engineers in both the motor and motor components industries will be looked at in the light of all the facts.

The background is that test engineers in both the motor industry and the components industry are often required, as part of their jobs, to test cars under various driving conditions. For certain types of test such as cold starting, the only practical way of conducting them is for the engineers concerned to use the cars for private journeys and to report on their performance.

In law, private use of the test car inevitably results in car benefit being chargeable. However, HMRC will not apply car benefit where the primary use of the car is for testing and any private use is clearly subsidiary to that testing.

Where the employees concerned have another car benefit car allocated to them on a permanent basis and they use the test car instead, the test car can be regarded as a replacement car (EIM25125). In such cases, no separate tax charge arises because of its use.

Where, however, the test car is used in addition to the normal car (for example, if the normal car is used by family members while the employee has the test car for private use), car benefit will be chargeable on the test car unless the “primary use” condition described above is met.

With the same exception, car benefit may apply where the employee is not chargeable to car benefit on their normal company car. For example, car benefit will apply where test cars are used for an employee’s holiday travel.

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.