HMRC internal manual

Employment Income Manual

Car benefit calculation Steps 1-4, examples: notional price

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Section 124 ITEPA 2003

When reading through this example you may find it useful to refer to:

  • the method statement in Section 121(1) ITEPA 2003, see EIM24015 (this page illustrates steps 1-4)
  • the flowchart for steps 1-4 at EIM24055
  • the guidance on notional price at EIM24150.

These examples illustrate the principles outlined at EIM24115. They are not meant to cover all possible scenarios, and other methods may be appropriate, depending on the particular facts and circumstances.

Left hand drive version of a car for which there is a UK list price for the right hand drive version

Assume that the car in question is made by an overseas manufacturer called Offshore.

We would need to consider a single UK retail customer approaching a UK Offshore dealer seeking an Offshore Auto left hand drive. It is likely that the overseas Offshore factory where the car is manufactured will be making cars of otherwise identical specification for both left hand and right hand drive markets. Therefore, presumably the UK dealer and importer will simply need to arrange for a left hand drive model to be included in a batch of cars for export to the UK.

It is therefore likely that, assuming that the rest of the specification is identical, the list price for a left hand drive model would not be significantly different from that for a right hand drive model. Although, of course, there might be a premium on the price to reflect the additional trouble taken to export the left hand drive car to an unusual market.

Accordingly, we would expect the notional price of a left hand drive car for which there is a right hand drive version with a UK list price, to be either the same as or higher than the UK list price.

This assumes that the specifications and qualifying accessories available with the cars are identical.

Car for which there is no UK right hand drive version

The approach will vary according to the circumstances and so it is impossible to prescribe a single approach.

Consider the following scenario:

  • the car in question is an Offshore 1.8 Hi-spec, which is marketed in the country of manufacture but not in the UK
  • there is also an Offshore 1.8 Basic, which is marketed in the UK as well as in the country of manufacture.

One approach in this case is:

  • look at the percentage price differential between the Basic and the Hi-spec versions in the country of manufacture
  • apply a similar uplift to the UK list price of the Basic version in order to arrive at a sensible approximation of the UK list price of the Hi-spec version.

Another approach would be to look generally at the list prices in the country of manufacture and the UK for Offshore cars that are marketed in both countries, in order to see if there is an identifiable trend in the relationship between the overseas and UK list prices (for example, the UK list price is normally the sterling equivalent of the overseas list price plus x%).

(This content has been withheld because of exemptions in the Freedom of Information Act 2000)