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HMRC internal manual

Employment Income Manual

HM Revenue & Customs
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Car benefit calculation Steps 1-8: 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 (8 payments cover the remainder of the tax year).

Calculation of 2004/05 car benefit charge

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 (from ready reckoner at EIM24700) 20%
Step 6 Car benefit (whole year basis) (£12,000 x 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 x 117/365 (see EIM25100 onwards) £770
Step 8 Less payments for private use: 8 x £50 (see EIM25250 onwards) £400
  2004/05 car benefit charge £1,230