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HMRC internal manual

Employment Income Manual

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HM Revenue & Customs
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Car benefit calculation Steps 1 to 4, price of the car: step by step guide

Sections 121 to 124 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 general introduction at EIM24050.

Steps 1-4

The steps are those in the Section 121(1) ITEPA 2003 method statement, see EIM24015.

    Car with a list price Car with no list price
       
Step 1   Find the list price of the car, see EIM24105 onwards. Find the notional price of the car under Section 124, see EIM24150.
Step 2   For both types of car, add the price of accessories.  
(stage 1) Initial extra accessories (type 1). Add these, whether or not they are available with the car in the tax year in question, see EIM24235. Nothing to add (these accessories are included in the notional price).
Note: the price at this stage is normally fixed while the same employee has the car.      
         
  (stage 2) Initial extra accessories (type 2). Add these if they remain available with the car in the tax year in question, see EIM24240. Nothing to add (these are also included in the notional price).
  (stage 3) Initial extra accessories (type 3). Add these if they remain available with the car in the tax year in question, see EIM24245. Nothing to add (these are also included in the notional price).
  Note: the following steps apply to all cars, whether with a list price or a notional price.      
           
  (stage 4) Later accessories. Add those available in the tax year in question that were not available with the car before 1 August 1993 and have a price of at least £100, Section 126(3) ITEPA 2003, see EIM24250.    
  (stage 5) Replacement accessories. Adjust as required at EIM24255 onwards.    
  Step 3   Deduct allowable capital contributions made in the year in question or earlier, see EIM24350 onwards.    
  Step 4   For years to 2010/11 only, the figure carried forward from step 4 is capped at £80,000, see EIM24440.    
           

Types of initial extra accessory

Type 1: With a list price published by the manufacturer, distributor or importer of the car.

Type 2: With a list price published by the manufacturer, distributor or importer of the accessory.

Type 3: For which a notional price must be used (i.e. for which there is no list price).

Other points

  • See EIM24175 about cars manufactured to run on road fuel gas.
  • See EIM24180 regarding the price of an automatic car for use by a disabled person from 2009/10 onwards.
  • See EIM24275 regarding equipment for disabled persons.
  • See EIM24280 on the cost of converting a car to run on road fuel gas.
  • See EIM24400 onwards for the calculation in respect of classic cars.