EIM23530 - Car benefit: calculation of charge: deduction for payments for private use of the 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 EIM23101 (this page illustrates step 8).

A deduction is to be made from the provisional sum calculated under step 7 of Section 121(1) if, as a condition of the car being available for the employee’s private use, the employee:

• is required in the tax year in question to pay (whether by deduction from earnings or otherwise) an amount of money for that use and
• makes that payment.

If the amount paid for the private use of the car equals or exceeds the provisional sum at step 7, the car benefit charge is nil. Otherwise the amount of the car benefit charge is the figure at step 7 reduced at step 8 by the amount paid. Note that if the amount paid exceeds the provisional sum at step 7, there is no relief elsewhere for this.

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.

See EIM23531 on payments for specific supplies or services, such as car insurance.

This section is subject to the replacement cars provisions of Section 145 ITEPA 2003 (see EIM23502).