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HMRC internal manual

Employment Income Manual

HM Revenue & Customs
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Car benefit calculation Step 8, payments for private use: deduction for payments for private use of a car

Section 144 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 8).

Where an employee makes a payment for private use, the amount of the payment is deductible from the provisional sum calculated at Step 7, section 121(1) ITEPA 2003. This amount is only deductible if it meets the requirements set out in section 144(1) ITEPA 2003.

The requirements for the deduction are that:

  • The employee is required to pay an amount of money for the private use of the car (see EIM25255); and 
  • The employee actually pays that amount in the same tax year; and
  • The payment is a condition of the car being available for the employee’s private use.
  • This means that the requirement for the employee to make a private use payment must be in place before the employee starts using the car for private use, although the actual payment or payments may be later in the tax year.
  • Where the employee has made a private use payment (which satisfies the above requirements) it is deducted from the provisional sum (see EIM24015) and the final figure is the cash equivalent of the benefit.
  • Where the deduction for private use is equal to or greater than the provisional sum, the cash equivalent of the benefit will be £nil. This does not mean that there is no car benefit, merely that the car benefit charge is nil, and so there will be a fuel benefit charge if the employer also provides fuel which is used for private mileage (EIM25510).
  • If the amount paid for private use is greater than the provisional sum, there is no further relief available for the excess.
  • The reference to the car being available for the employee’s private use includes a reference to the car being available for the private use of a member of the employee’s family or household.
  • This section is subject to the replacement cars provisions of section 145 ITEPA 2003 (see EIM25125)