Car benefit calculation Steps 1 to 4, price of the car: introduction
Section 121(1) ITEPA 2003
Before reading the guidance that follows this paragraph, ensure that you are familiar with the method statement in Section 121(1) ITEPA 2003, see EIM24015 (this page concerns step 1).
The flowchart at EIM24055 is a summary of how to calculate the price of the car, which is the starting point for the calculation of the cash equivalent of a car benefit. The price of the car for tax purposes is determined in accordance with the provisions of Sections 122 to 124 ITEPA 2003.
The price of the car will usually be based on list price. Different rules apply if:
- the car has no list price (the notional price is used, see EIM24150)
- the car is a classic car (see EIM24400 onwards)
- the car was manufactured as a road fuel gas car (see EIM24175).
Note that the price of the car is not the price actually paid by the person providing the car.
Adjustments for accessories (see EIM24200 onwards) and capital contributions (see EIM24350 onwards) are made in steps 2 and 3. The net result is the price used to calculate the cash equivalent, the price of the car and accessories less capital contributions, at step 4. This should be the same as it would have been under the rules in the previous (ICTA 1988) legislation, despite the different structure.
Examples of the calculation of the price of a car are at EIM24450 onwards.