EIM25290 - Car benefit calculation: steps 1 to 8: price of car and accessories, unavailability and payments for private use: example
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 all steps).
A new car is first made available for private use to an employee on 1 August 2004. It uses petrol and has an approved CO2 emissions figure of 173 g/km.
The list price of the car and its accessories is £15,500 and the employee contributes £3,500 to the cost.
The employee is required to pay £50 per month for the private use of the car, and the payments are for private use and nothing else (eight payments cover the remainder of the tax year).
Calculation of 2004 to 2005 car benefit charge
| Step | Item | Amount |
|---|---|---|
| Steps 1 and 2 | List price of car and accessories (see EIM24050 onwards) | £15,500 |
| Step 3 | Less capital contribution (see EIM24350 onwards) | £3,500 |
| Step 4 | Net price of the car and accessories | £12,000 |
| Step 5 | Appropriate percentage | 20% |
| Step 6 | Car benefit (whole year basis) (£12,000 × 20%) | £2,400 |
| Step 7 | Car unavailable 6 April 2004 to 31 July 2004 = 117 days, so reduction for the period the car was unavailable is £2,400 × 117 ÷ 365 (see EIM25100 onwards) | £770 |
| Step 7 continued | £2,400 - £770 = | £1,630 |
| Step 8 | Less payments for private use: 8 × £50 (see EIM25250 onwards) | £400 |
| Step 8 continued | 2004 to 2005 car benefit charge | £1,230 |