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HMRC internal manual

Employment Income Manual

HM Revenue & Customs
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Car benefit: special cases: employees with frequent changes of car (from 2009/10): averaging process: outline

As EIM23800 explains, the basic rule in law is that each employee is chargeable on every car made available to them which is within the car benefit charge. That legislation applies equally to employers and employees covered by this guidance, that is to those described at EIM23815. This guidance explains how the car benefits legislation is applied to those employers and employees.

In cases covered by this guidance, each employee is deemed to drive a single notional car powered by petrol instead of the multitude of real cars actually available to them.

The following pages describe how the averaging process operates in practice:

  • Averaging Step 1: identify cars to be averaged (EIM23830; for cars without a CO2 emissions figure, see EIM23835)
  • Averaging Step 2: separate the cars into groups (EIM23840)
  • Averaging Step 3: calculate the average price of the notional car in each group (EIM23845)
  • Averaging Step 4: calculate the average CO2 emissions and appropriate percentage of the notional car in each group (EIM23850)
  • Averaging Step 5: determine the benefit charge for the notional car in each group (EIM23855)
  • Averaging Step 6: identify employees within these arrangements (EIM23860)
  • Averaging Step 7: allocate those employees to groups (EIM23865).

There is an example of Steps 1 to 5 at EIM23870.

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.