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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: circumstances that do not count as arrangements: example

Section 145 ITEPA 2003

Before reading this example, ensure that you are familiar with:

  • the guidance on step 7 at EIM25100 onwards and
  • in particular, the meaning of arrangements, see EIM25135.

An employee has as his or her normal company car a small hatchback with a list price of £9,000.

That car develops a fault that is expected to take a week to repair and the garage provides a courtesy car as a replacement. The only courtesy car left in the garage that particular week is a larger family saloon car with a list price of £15,000.

Although the replacement car has a higher price than the normal car it has not been made available under an arrangement whose main purpose is to provide the employee with the benefit of a materially better car. Accordingly, the car is treated as a replacement car, see EIM25125.