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HMRC internal manual

Employment Income Manual

HM Revenue & Customs
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Car benefit calculation Step 7, car unavailable: replacement car

Section 145 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 illustrates step 7)
  • the introduction to step 7 at EIM25100.

The definition of unavailable (see EIM25105) means that if a car is not available for a period of less than 30 days, the employee is charged as though it were still available. If during that period the employee is provided with a replacement car, for example when the normal car is being repaired, the employee is still charged for the full year on the normal car without time apportionment. There could also be a separate charge on the employee for the replacement car.

Section 145 ITEPA 2003 removes the charge on a replacement car in most circumstances where the normal car is not available for less than 30 consecutive days.

The replacement car is to be regarded as unavailable for that period if:

  • it is not materially better than the normal car (see EIM25130), or
  • it is not made available under an arrangement of which the main purpose, or one of the main purposes, is to provide the employee with the benefit of a car that is materially better than the normal car (see EIM25135).

If either of those conditions is met, the availability of the replacement car is not charged as a benefit. This also means that there is no fuel benefit charge for the replacement car in addition to that for the normal car (see EIM25510).

There is also an effect on the calculation of the benefit of the car that is temporarily unavailable. Any payments made for the private use of the replacement car that qualify as a reduction under EIM25250 are treated as though they were made for the private use of the normal car (Section 145(4)(b)).