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HMRC internal manual

Employment Income Manual

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HM Revenue & Customs
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Car benefit calculation Step 7, car unavailable: replacement car: circumstances that do 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.

The employee plans a family motoring holiday for two weeks and the employer withdraws the small car and provides instead a large estate car for that purpose.

In this case there was an arrangement to provide the employee with a materially better car and therefore the car is not a replacement car within Section 145.

This means that the larger car is charged as a benefit for the period during which it is available in addition to the unreduced charge on the normal car, because the period for which the normal car is unavailable is less than 30 days.