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HMRC internal manual

Employment Income Manual

Car benefit calculation Step 8, payments for private use 2014/15 onwards - exceptional circumstances

Section 144 ITEPA 2003

This guidance applies to 2014/15 onwards.

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

  • the method statement in section 121(1) ITEPA 2003, see EIM24015 (this page illustrates step 8); and
  • the guidance on step 8 at EIM25250 onwards.

Where an employee can use a company car for private use, but as a condition of this use they are required to pay for this use, this amount can be deducted to arrive at the cash equivalent of the car benefit, so long as the payment is made in the relevant tax year.

The employer must put suitable measures in place to administer this. You can normally accept an employer’s statement:

  • that it is a condition of the provision of the car that the employee is required to make a payment towards the private use of the car; and 
  • the employee has made the payment; and 
  • the payment was made in the relevant tax year.

In some exceptional circumstances the employer may not be able to reconcile private use payments until the end of the tax year. In these rare cases HMRC will accept private use payments made by 6 July as being made in the previous tax year.

Payments for private use from 6 April 2017

From the 2017/18 tax year, private use payments made before 6 July following the tax year in which the benefit was provided will be accepted as reducing the cash equivalent as long as they meet the conditions set out in EIM25250.