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HMRC internal manual

Employment Income Manual

Car benefit: special cases: employees with frequent changes of car (from 2009/10): Averaging Step 7: allocate qualifying employees to the notional cars

EIM23815 explains why the arrangements described on this page exist and EIM23825 explains how the guidance on them is laid out.

This page follows from Step 6, described at EIM23860.

STEP 7: allocate qualifying employees to car groups

This should pose little difficulty in practice. The employer simply allocates each member of staff to a group, thus determining which cars are available to them. This may be done on an individual basis or by job type (e.g. sales executive, service manager). The number of employees at a location allocated to a group may not exceed the number of cars in that group at that location, but all groups at a location must be populated with employees because those groups only contain cars which are available to employees for private use.

There are three main exceptions to this standard pattern:

  • an employee joining during the year is allocated to the appropriate group from the date on which they are first entitled to use a grouped car. A form P46(car) is completed using the details of the notional car for that group and the date goes onto their first form P11D.
  • an employee leaving during the year: a P46(car) is completed showing that the car has been withdrawn and the date of leaving goes onto their final P11D.
  • an employee who changes their job during the year may move up or down a group. No P46(car) is required (though the employer may complete one if they wish) and they are shown on form P11D as having two cars available in succession during the year, the first up to and the second from the date of change.

If an employee uses a car of a different group, see EIM23875.

Special rule for daily rental businesses

These rules apply where only one grade or kind of employee is allowed to use cars privately at each location and that employee is instructed to use a car from the lowest available group. Each employee should be allocated to the group set by the rental business with an average price immediately below the average for all available cars as determined at Step 3 (EIM23845). They are deemed to use a car in that group, even though they may be allowed to use and actually use cars from higher and lower groups depending on availability.

If an employee has a free choice of what car to use, the average price determined at Step 3 should be used and the CO2 emissions figure calculated for that car using the rules at Step 4 above.

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.