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HMRC internal manual

Employment Income Manual

Car benefit calculation Step 8: payments for private use: deductions for private use of a car - CIR v Quigley

Section 144 ITEPA 2003

CIR v Quigley (67 TC 535, [1995] STC 931)

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) and the guidance at EIM25250.

Where an employee makes a payment for private use, the amount 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 issue of what a payment for private use means was considered in the tax case CIR v Quigley.

In this case the employee was required to pay for insurance as a condition of the car being made available for private use. The question that the Court considered was whether paying for the insurance was a payment for private use? The Court concluded that it wasn’t; the Lord President, Lord Hope said (at [1995] STC; page 938: line 27 or 67 TC 535: page 544: line 9):

“The payments must be payments which the employee is required to make as a condition of the car being available for his private use. Voluntary payments by him for whatever purpose cannot be bought in to account. Then the payments must also be made by the employee for the use of the car for his private use. Payments by him for some other purpose, or to entitle him to some other benefit, must also be left out of account. So far as the cost of the insurance in the present case is concerned, it is clear that the taxpayer was required to pay for this by his agreement with the Forestry Commission. So these payments do not fall out of account as having been made voluntarily. On that point there is no difficulty. But they were made in respect of, or in exchange for, the insurance of the vehicle, not for the use of it. That insurance was, as the commissioners have held, a necessary prerequisite for the day-to-day use of the car, for both private and business use. Thus the payments which the taxpayer made for the insurance were made a different purpose than for the private use of the vehicle. In my opinion the taxpayer was not entitled, on these facts, to bring the payments which he made for insurance into account by way of reduction of the cash equivalent of the benefit of the car for his private use.”

In summary, even though the employee had to pay for the insurance in order to be allowed to make private use of the car, the insurance was necessary for both private and business use of the car. This meant that the payment was for something other than just private use of the vehicle and so no deduction was available.

This means that before a deduction can be allowed for a private use payment, you need to confirm that the payment is for private use only and not for anything else (see EIM25250)